Japan needs more convincing of the merits for making cryptocurrency investing easier for its population, the nation’s top regulator said.
While Japanese Financial Services Agency (FSA) Commissioner Junichi Nakajima said he is open-minded about the potential benefits that assets such as bitcoin possess as a quick and cheap way to send cash, in Japan they are mainly being used for speculation and investment, not as a means of transferring money.
New challenges are coming from a broader proliferation of firms involved in decentralized finance, he said.
“We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto assets,” said Nakajima, 58, who became head of Japan’s financial regulator last month.
Unlike in the US, where investors now have a multitude of ways to invest in the burgeoning asset class, Japan remains heavily restricted by comparison.
The FSA last month set up a study group of outside experts and is expected to consider regulatory responses to decentralized finance in the coming months, with investors looking to Nakajima for clues on the outlook.
Nakajima was involved in crafting Japan’s first regulatory framework on cryptocurrency assets, including the registration requirement for exchanges in 2017.
The nation has since tightened up, following a massive coin theft at Tokyo-based exchange Coincheck Inc in 2018, which revealed lax internal control and customer protection.
While Nakajima said that the current regulatory framework on cryptocurrency exchanges has been effective in customer protection and countering money laundering, many of the 31 registered exchanges are struggling financially.
Their business situation “is rather tough,” he said.
In the US, Securities and Exchange Commission Chairman Gary Gensler said regulating cryptocurrency exchanges is perhaps the easiest way for the government to get a quick handle on digital token trading, but he is also concerned about new ways people are getting into cryptocurrency, such as peer-to-peer lending on decentralized finance platforms.
A crackdown in China, on exchanges, miners and traders, left some players shifting into lesser-known tokens and decentralized storage technologies.
Nakajima, a career bureaucrat and engineering major from the University of Tokyo, said unlike stocks, cryptocurrency does not have underlying assets and is therefore subject to big price swings. That is one of the reasons the Japanese regulator does not allow cryptocurrency investment trusts, which are considered an easy way for the public to gain exposure to the asset class.
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