A new report shows that strict regulations in Japan are likely to benefit new players in the long run.
Double jump.tokyo, the game developer behind My Crypto Heroes, introduced So & Sato, a Japan-based law firm specializing in crypto and blockchain.
On March 31, the law firm released a report on all aspects of digital assets in the Asian nation, from tokenized securities to crypto derivatives.
Joerg Schmidt and So Saito of So & Sato told Cointelegraph Japan in an interview that local regulations for cryptocurrency exchanges are “much stricter” than in most other countries. However, they said this would be beneficial in the long run as it encourages the traditional financial world to get involved:
“The market is highly regulated in Japan. What may seem like regulatory overkill at first glance is likely to help the market mature in the medium to long term. This will allow more institutional players to enter the market and increase their importance in the space for digital assets. ”
Regulations related to crypto in Japan are generally governed by the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA). Amendments passed for both laws, tightening existing regulations, will come into effect in May.
Under the new PSA regulations, crypto exchanges must employ external operators to hold their users’ money and separate it from their own cash flow.
Under local law, cryptocurrency exchanges in Japan must be licensed through the country’s Financial Services Agency (FSA), while foreign-based exchanges must be licensed both in their own jurisdiction and in Japan. The report describes the requirements:
“To register as a crypto asset exchange [in Japan]companies must meet certain criteria. Local businesses must be incorporated as a public limited company and have a minimum capital of JPY 10 million. An exchange must further ensure that the net assets are not less than the amount of the users’ money stored in a hot wallet. “
Today, 23 scholarships are registered with the FSA, although none of them are still managed abroad. OKCoin, a subsidiary in Japan, has recently been licensed. So explains why the regulations seem to discourage foreign exchanges:
“Some Chinese exchanges have purchased an already licensed Japanese exchange, so it is open to foreign exchanges to acquire licensed entities in Japan. But under the regulations, if foreign crypto exchanges want to obtain Japanese licenses themselves, they must have similar licenses in their country under current regulations. There are not that many comparable exchanges abroad. “
The law firm concluded that the most likely exchanges that could be granted would come from countries such as the United States, where regulations are thorough.
While local regulations may not be conducive to foreign exchanges at the moment, the law firm hinted that it was not a bad time to enter the crypto market in Japan.
They believe the regulatory measures help to set Japan apart as a safe haven for crypto, rather than the wild west of finance it is sometimes known for.