Japan: Zaif Exchange Handover Complete as Previous Owner Vows to Dissolve Company

Tech Bureau, the company that formerly operated hacked Japanese cryptocurrency exchange Zaif, has completed its handover to buyer Fisco Cryptocurrency Exchange (FCCE), Cointelegraph Japan reported Nov. 22.

FCCE, which agreed to take over proceedings in October, will now assume responsibility for compensating users who lost money in the hack, which occurred Sept. 20 and involved funds worth around $60 million at the time.

According to a press release from FCCE, compensation proceedings should begin before the end of this month.

No timeframe has yet been set for deposits and withdrawals at Zaif to resume.

Confirming the move, Tech Bureau said it planned to dissolve its entity and retire from the cryptocurrency industry.

“We will abolish the registration of our virtual currency exchange and plan to dissolve,” the company wrote in a statement.

The hack occurred as both authorities and the Japan’s new self-regulatory crypto group are beefing up application requirements for the country’s new cryptocurrency exchange licensing scheme.

In January, fellow exchange Coincheck lost $534 million in one of the biggest exchange hacks in history, subsequently seeing a buyout and turnaround by online broker Monex.

Last week, Coincheck finally began resuming deposits and withdrawals of NEM (XEM), one of the coins affected by the hack.

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Japan: Messaging Giant LINE Launches Trading of Its LINK Token on Native Exchange

Japanese messaging app provider LINE Corporation announced that its newly-developed LINK (LN) token is now tradeable on its native BITBOX cryptocurrency exchange in a press release Tuesday, October 16.

LINE, which launched BITBOX in July, will offer trading against three cryptocurrency assets – Bitcoin (BTC), Ethereum (ETH) and Tether (USDT) – out of a total of thirty currently available on the exchange. BITBOX does not offer fiat trading.

In future, LN holders will be able to spend their holdings in LINE’s decentralized application (DApp) system, also currently under development, the press release notes.

“We’re very pleased that users are now able to trade LN on BITBOX, which is a major step forward in our plans for creating a token economy,” LINE CEO Takeshi Idezawa commented in the release, continuing:

“We think it is important to promote co-creation and mutual growth with LINK, while ensuring BITBOX continues to develop as a user-friendly platform that adds value to those who use it and contribute to our services.”

Along with promotional activities such as an airdrop of TRON (TRX) tokens for LN holders, the move marks the latest step in the company’s continued efforts to embrace the crypto economy.

As Cointelegraph reported in August, LINE’s Hong Kong-based subsidiary Unblock launched a $10 million “corporate token fund” with the aim of “boosting the development and adoption of cryptocurrencies and blockchain technology.”

Separately, internet conglomerate GMO Internet Co. Ltd revealed plans earlier this month to launch a cryptocurrency stablecoin pegged to the Japanese yen.

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Operator of Hacked Crypto Exchange Zaif Gets Third Warning From Japan's Watchdog

Japan’s Financial Services Agency (FSA) has issued a third business improvement order to the owner of hacked crypto exchange Zaif, Tech Bureau. The news was reported by Cointelegraph Japan today, September 25.

As previously reported, as a result of a security breach on the Zaif exchange September 14, hackers succeeded in stealing 6.7 billion yen ($59.7 million) worth of crypto assets belonging to both users and to the exchange itself. The Financial Services Agency had already ordered Tech Bureau to make business improvements first in March, and subsequently in June this year.

The FSA considers that Tech Bureau’s investigation into the causes of the recent hack – as well as its response to customers – have been inadequate. While the firm reportedly announced it was in talks with Fisco Group to receive financial support of 5 billion yen on Friday, September 21, the FSA says it did not receive a concrete report on the matter from the firm directly.

The FSA’s newly-issued business improvement order specifies the following contents as necessary measures that are to be urgently addressed:

“(1) Determination of the facts and causes of the hacking incident (including clarification of the attribution of responsibility) and [the] formulation and execution of measures to prevent [its] recurrence

(2) Prevention of [the] expansion of customer damage

(3) Response to customer damage

(4) Review and implement concrete and effective improvement plans based on the hacking incident, [as well as the] contents of [two prior business improvement orders] from 8 March and 22 June [this year]

(5) Submit written reports pertaining to (1) and (4) above by Thursday, September 27.”

According to CT Japan, FSA staff are continuing to undertake on-site inspections of Tech Bureau. Based on their findings, the agency will reportedly potentially issue more stringent measures such as a business suspension order and/or cancellation of the exchange’s registration.

Earlier this summer, the FSA published the results of its on-site inspections of cryptocurrency exchange operators, deciding on the basis of its findings to apply more rigorous oversight into new applications from exchanges hoping to receive an official operating license. According to the agency, there are currently “hundreds” of companies awaiting its review.

In the wake of January’s industry record-breaking $532 million hack of crypto exchange Coincheck, the year has seen the agency unfold a series of increasingly exacting measures for domestic operators.

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Japan’s Financial Regulator Expands to Handle Influx of Crypto Exchange License Demand

Japan’s Financial Services Agency (FSA) plans to bolster its workforce by 12 personnel to better handle the growing influx of applications for crypto exchange licenses, Reuters Japan reported September 12.

At a crypto exchange study group meeting Wednesday, the FSA’s vice commissioner for policy coordination, Kiyotaka Sasaki, said that the agency is currently conducting its oversight of crypto exchanges with a team of around 30 people, whose work includes the review of license applications.

Yet Sasaki reportedly stressed that with over 160 firms currently awaiting review, the dedicated number of personnel is insufficient, saying the agency would need to add 12 further persons in 2019 to handle its “biggest problem” – the burgeoning number of license applications.

According to a document released after the meeting, the FSA has to date been reviewing sixteen cases, twelve of which withdrew their application at the FSA’s request and one of which has been rejected. Three, including Coincheck — which notoriously suffered the largest hack in crypto industry history this January — await a final decision.

The document further states that the agency plans to refine its risk profiling mechanisms as part of its “ongoing in-depth monitoring” of the exchange space, and to work increasingly closely with related ministries and agencies vis-a-vis non-registered firms, both domestic and overseas.

The document highlights concerns over insufficient anti-money laundering (AML) and terrorism financing prevention measures among exchanges, and points to other concerns regarding business models, risk management and compliance, internal audits, and corporate governance.

As previously reported, the FSA published the results of its on-site inspections of crypto exchange operators last month, finding that  the total digital assets of domestic exchanges have surged to 792.8 billion yen ($7.1 billion) — an over six-fold increase within the space of one year.

Meanwhile, as today’s document reiterates, most exchanges’ system personnel are fewer than 20 people, meaning that one employee on average was found to be managing digital assets worth 3.3 billion yen ($29.6 million).

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Japan’s Financial Watchdog Publishes Results of Its On-Site Crypto Exchange Inspections

Japan’s financial watchdog, the Financial Services Agency (FSA), has published the results of its on-site inspections of cryptocurrency exchange operators, Cointelegraph Japan reports August 10.

Based on its findings, the watchdog has decided to apply more rigorous oversight into new applications from exchanges hoping to receive an official operating license. Newly registered exchanges will be required to undergo on-site inspections at an early stage and the agency plans to closely examine the effectiveness of their business models.

According to the agency, there are currently “hundreds” of companies awaiting its review.

The FSA probe revealed that exchange operators’ maintenance of their internal control systems has failed to keep pace with the rapid growth of transaction volumes, which it partly attributed to the “renaissance” of the crypto markets in fall 2017.

According to the investigations, the total digital assets of domestic exchanges surged to 792.8 billion yen ($7.1 billion), an over six-fold increase within the space of one year. Meanwhile, most exchanges’ workforces are fewer than 20 people, meaning that one employee on average was found to be managing digital assets worth 3.3 billion yen ($29.7 million).

The comprehensive document identified a wide array of problems across exchanges’ business models, risk management and compliance, internal audits, and corporate governance. The agency further highlighted concerns over insufficient anti-money laundering (AML) measures among certain exchanges.

Local news platform Nikkei has reported that it is likely the new registration of exchange operators — which had virtually stopped in the wake of January’s $532 mln hack of crypto exchange Coincheck — will resume following the FSA’s interim publication.

The FSA has said that “substantial” ongoing review of registration procedures will be necessary, and that it will continue to give “priority to investor protection.”

In May, the FSA unrolled regulatory stipulations for registered exchanges, including tough restrictions on the trading of anonymity-oriented altcoins.

In July, the FSA announced it was considering changing the legal framework for the regulation of cryptocurrency exchanges, and the agency was also recently restructured in order improve its handling of fintech-related areas, including cryptocurrencies.

A self-regulatory body, the Japan Virtual Currency Exchange Association (JVCEA), formed in early March in order to develop and coordinate policies in conjunction with the FSA. Last month, JVCEA announced it would be requiring its members to place maximum limits on the volumes traded by their customers.

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Japan Labor Ministry Confused as Crypto Salaries Demand Increased


Japan’s Labor Ministry is not hiding its confusion as the Tokyo Metropolitan Government and venture companies requested a deregulation of the Labor Standard Act. Japan has respected the “salaries in cash” principle for 70 years under the Labor Standard Act, however with the proliferation of digital money and salaries paid in cryptocurrencies, withdrawing money from a bank could increasingly be unnecessary, Nikkei reported.

Also read: Can Banks be Replaced by an App? BitWage says yes they can

Increasing Conversion to “Cashless” Trends Also Seems to Bring Controversy

The NSSZ (National Strategic Special Zone), which is designated by the national government based on the perspectives of boosting the international competitiveness of industry and promoting the creation of centers of international economic activities by giving priority to advancing structural reform of the economic system, together with Tokyo-based venture companies, reportedly requested a change in regulations.

On February 14, the government announced a plan to hold a national strategic advisory council to discuss making salary payments onto smartphones equipped with a prepaid card function, in specific zones. The government was aiming to improve convenience by remitting salaries onto a smartphone that can be used as a wallet. The whole idea was also intended to make it easier for foreign workers who have difficulty opening a bank account in Japan.

Japan Labor Ministry Confused as Crypto Salaries Demand Increased

Wages have always been paid by cash payment under the Labor Standards Law. However, the Ministry of Health, Labor and Welfare, which is under the jurisdiction of this law, said it would consider concrete measures to protect the transfer of salary when the operator of the electronic money goes bankrupt.

Regional revitalization minister Hiroshi Kajiyama said at a press conference held on June 14, that during the Advisory Council of the NSSZ he received an interesting proposal for wage payment into a prepaid card, Nikkei reported.

Doreming Holding, which develops a software that can transfer salaries onto smartphones, reportedly made a presentation in front of Japan’s prime minister Shinzo Abe himself. “We developed a software that deregulates the current state regulation to enable digital payment of wages to electronic wallets on mobile smartphones,” the company said. “It should stimulate not only payment for foreigners, but it can also be used for consumption.”

Governor Koike’s Attention Was Caught as Japan Is Seeing an Increasing Number of Foreign Workers

Such discussion started in March this year, as the Tokyo Metropolitan government proposed the idea during the Advisory Council of the NSSZ. Yuriko Koike, the governor of Tokyo encountered the unfamiliar word of “payroll card.” In the U.S., such prepaid payroll card is expected to spread to over 12 million people by 2019. The payroll card is a card that can receive wages from a company without going through a bank account. Payroll prepaid cards are often used in the U.S. by companies with a large number of independent contractors. The introduction of such a card has also begun in African countries where many people do not have bank accounts in the first place. 

Employers are increasingly moving away from depositing paychecks into employees’ bank accounts, offering instead to add them to payroll cards.

Japan Labor Ministry Confused as Crypto Salaries Demand Increased

Payroll cards are like debit cards, they allow employees to purchase goods and services or make cash withdrawals from ATMs. Unlike debit cards, though, there is no bank account tied to the card, and money is directly added to it by employers. In fact, employers are the only entities that can add funds to a payroll card account.

Foreigners working in Japan need to have an address in Japan and a residence card that covers the period of one year or more if they want to open a bank account. Due to a lack of manpower, Japan is increasingly developing a foreign workforce. According to the Ministry of Health, Labor and Welfare, as of October 2017, there has been 1,270,000 foreigners working in Japan, a number that increased by 18% since last year. “We have received many consultations from people not being able to open a payroll account in banks,” a Tokyo government official told Nikkei.

This Deregulation Debate Is Likely to Bring up Controversy Within the Government

Because the system would remove the need to transfer money into a bank account, it is expected that such project would accelerate the concept of “cashless-ness”, however the Ministry of Labor which would formulate such jurisdiction is extremely cautious.

The Labor Standards Law, enacted in 1947, regulates payroll transfers under Article 24 (1). As a general rule, it specifies that “the company puts cash in a salary ‘bag’ on payday and hands it to the employee.” Nowadays, bank transfers are the most common for wage payments, however digital money is not really considered yet.

Japan Labor Ministry Confused as Crypto Salaries Demand Increased

GMO Internet group made payment in bitcoin as part of their salary options possible this spring. LINE distributes electronic money that can be used on smartphone settlements for employees as part of welfare benefit every month, separately from their salary.

The Ministry of Health, Labor and Welfare must be extremely careful in phrasing such law, as its main goal is to firstly protect the worker. If this deregulation is widely acknowledged, and payments other than cash payment can be made possible, it could allow black enterprises to abuse their employees by paying their salaries with a proprietary cryptocurrency in which the value could be doubtful.

What do you think of companies in Japan paying employees in crypto using a payroll card? Join the discussion in the comments section below!

Images courtesy of Shutterstock and Nikkei.

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Japan’s Tech Giant Sony Offers Solutions for Boosting Blockchain Hardware in Two Patents

Japanese electronics giant Sony has filed two patents for boosting blockchain-based ecosystems, according to filings 20180218027 and 20180219686 published by the U.S. Patent and Trademarks Office (USPTO) Aug. 2.

Through the patents, Sony intends to improve the design and structure of blockchain hardware by introducing new circuitries to the processes of distributed ledger technology.

The first application, entitled “Electronic Node and Method for Maintaining a Distributed Ledger,” describes an electronic device for maintaining a blockchain based on multiple electronics nodes, including multiple blocks associated with at least one of the existing blocks.

The patent explains a scheme of adding new blocks on а distributed ledger in a compressed format, which contributes to the establishment of а competitive manner of nodes that perform mining process, implying that a smaller block produced by the node can be achieve a bigger reward.

In the second patent “Device and System,” Sony proposes a way of maintaining a blockchain by multiple virtual nodes, suggesting a mechanism of accessing the distributed ledger via at least one of these nodes.

By incorporating virtual nodes, Sony intends to ensure the integrity of the blockchain in cases “where the number of devices is small or becomes small;” for example, if a number of devices went down.

Founded in 1946, the Sony Corporation had previously paid tribute to the fast growing technology of blockchain; however, the latest patents are the company’s first introduction into a hardware system of distributed ledger.

In 2017, the multinational conglomerate filed a patent application for a blockchain-powered multi-factor authentication system (MFA), proposing a combination of two different distributed ledgers to conduct the login process.

Also in 2017, Sony partnered with tech giant IBM to develop an educational platform based on blockchain to provide secure sharing of student records.

Recently, U.S. retail giant Walmart applied for a patent on the management of smart appliances via blockchain, which would maintain the private keys in order to authorize a transaction. Earlier in July, Bank of America (BoA) filed a patent for a blockchain-powered system of data validation that offers tracking of sources of information by confirming resource transfers.

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Japan’s SBI Group to Develop Crypto Derivatives Platform Following New Investment

Japanese financial services giant SBI Holdings will expand its crypto business portfolio by acquiring a 12 percent stake in Clear Markets, according to SBI’s financial results report published July 31. SBI is scheduled to acquire up to 20 percent in the future.

Clear Markets is a U.S.-based electronic trading platform developer and operator that offers over-the-counter derivatives electronic trading services in the U.S., U.K., and Japan.

SBI’s new stake in Clear Markets is part of an effort to create a cryptocurrency derivatives trading platform catered toward institutional investors. The platform will reportedly allow financial institutions to trade more smoothly on the crypto derivatives market.

Clear Markets will provide hedging for cryptocurrency swap transaction services which is “necessary for the handling of cryptocurrencies and financial instruments that use cryptocurrencies.” In the report, SBI Group noted that the increased use of cryptocurrencies and its derivatives will increase liquidity levels.

While the price of the stake was not disclosed, according to Nikkei Asian Review, it is likely worth around $9 million.

Clear Markets is planning to launch а crypto swap trading service and holds a swap execution facility (SEF) license from the U.S. Commodity Futures Trading Commission (CFTC) and derivatives brokerage in the U.K. and 32 countries in Europe. The company is an an affiliate of QUICK Corp. which is a subsidiary of Japan’s Nikkei Inc.

SBI has invested in more than 20 crypto crypto-related projects over the past year, and formally launched the public version of its cryptocurrency exchange VCTRADE July 17.

Japan is one of the leading countries in terms of cryptocurrency adoption. According to Clear Markets chief executive Mark Brickell, “as much as 50 percent of cash trading in cryptocurrency,” has taken place in the country.

Last week, the Japan Virtual Currency Exchange Association (JVCEA) announced it will require its member exchanges to place limits on the trading activity of some clients in an attempt to prevent investors with “small assets” from suffering heavy losses.

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Japan Self-Regulatory Crypto Exchange Association Considers Trading Cap for Some Clients

The Japan Virtual Currency Exchange Association (JVCEA) will obligate its member exchanges to place limits on the trading activity of some clients, Cointelegraph Japan reports today, July 28.

The self-regulatory body has reportedly established a policy of to require its member crypto exchanges to place maximum limits on the volumes traded by the exchanges’ customers.

The move reportedly aims to prevent investors with “small assets” from suffering heavy losses and facing problems with basic daily expenses. The report does not specifically define “small assets,” nor does it specify the exact limits to be placed.

According to the report, member crypto exchanges will be able to choose from two options for how they establish trading limits.

The first option proposes a universal ceiling that implies establishing one fixed maximum limit for all “small asset” traders. The second option suggests a more individual approach by setting different limits for different customers depending on various factors such as their investment experience, income, the value of their assets, and age.

The JVCEA has also reportedly suggested trading activity limitations for minors, requiring an adult’s confirmation as a measure against money laundering.

Earlier this week, the JVCEA  announced its intentions to put limits on its member exchanges’ margin trading, reportedly with the same intention of preventing customers from significant losses caused by highly volatile crypto markets.

The JVCEA was formed in early March, with 16 crypto exchanges teaming  up to develop and coordinate rules and policies for ensuring security standards for trading cryptocurrencies. The group’s formation came following the January hack of Japan-based crypto exchange Coincheck, with losses totalling more than $534 mln.

The association is reportedly set to regulate the market in conjunction with the local Financial Services Agency (FSA), which has been restructured recently in order improve its handling of fintech-related areas, including cryptocurrencies.

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Japan: Tech Giants Hitachi, KDDI Trial Blockchain Biometrics Verification System for Retail

Tokyo-headquartered tech conglomerate Hitachi and telecoms giant KDDI are trialing a retail coupon settlement system that combines blockchain with biometrics, Cointelegraph Japan reports today, July 26.

This week, staff from the two firms are participating in an experimental demonstration at a KDDI store in Tokyo’s Shinjuku district, as well as a local donut shop.

The trial integrates Hitachi’s Hyperledger Fabric-powered platform with biometric verification technology and KDDI’s existing retail coupon system. Users will first register their biometric data and coupon credits at a KDDI store, and then proceed to settle their coupon transactions at the local donut shop, using only their fingerprints to validate the purchase.

As Hitachi explains in this week’s press release, unlike traditional biometric identification infrastructure, the trial solution encrypts the biometric data, which thereafter functions as part of a public key authentication system.

Users’ biometric data, coupon credits, and transaction histories are all encrypted and recorded on the blockchain. Selected retailers can then participate as nodes in the network, scanning consumer fingerprints in order to settle the transaction request.

Hitachi says it aspires to use the tamper-proof system to securely update consumers’ coupon balances across stores within the network simultaneously.

The notion of integrating blockchain with biometrics to create immutable and secure ID verification systems has been circulating for some time, with many advocating for its potential benefits. Crypto industry veteran and security systems expert Andreas M. Antonopoulos, however, expressed his skepticism as early as 2016, considering that:

“By embedding into a blockchain, the irrevocability of biometrics is added to the immutability of a blockchain which makes dealing with compromised biometrics even more difficult. [Moreover], while biometric registration may not reduce anonymity directly, it can be used to enhance statistical analysis of activity, so that the leak of a single identifier can destroy all privacy.”

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Japan: Self-Regulatory Crypto Exchange Association Considers Margin Trade Limits to Stem Losses

The Japan Virtual Currency Exchange Association (JVCEA) said it wants to place restrictions on member exchanges’ margin trading. The news of the plans of Japan’s self-regulatory cryptocurrency body comes from a Chinese media report July 24.

Margin trading is the practice of borrowing money from the broker, used by crypto traders to buy or sell more cryptocurrency than they could afford on their own – thereby increasing their potential profits, along with the losses.

The JVCEA, which is still testing the water regarding its own effectiveness after officially coming into being earlier this year, wants to limit the amount margin traders can borrow to four times the amount of their investment.

“It aims to prevent investors from suffering a lot of losses due to sudden price fluctuation of the virtual currency,” JiJi.com reports the group as saying, adding it planned to enact the rule within a month if it gained support.

The JVCEA was born out of a desire to promote trustworthiness as a key element of Japan’s cryptocurrency economy.

Domestic exchanges have faced major upheaval throughout 2018 after one operator, Coincheck, lost $534 million in a hack in January.

With regulatory compliance now a top priority for exchanges, the JVCEA aims to keep regulators from being forced to get involved in the market as was the case with Coincheck.

However, teething troubles saw the group lose its two vice presidents in June, both of whom were also CEOs of exchanges facing adherence demands from the country’s Financial Services Agency (FSA).

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Japan May Play Leading Role in G20’s Crypto Regulatory Stance

Despite gaining legitimacy in the eyes of many more individuals across the world, cryptocurrencies are still a contested topic within regulatory circles, especially with the regulatory bodies of developed countries.

FSB: Crypto Assets Don’t Pose A Risk To Global Financial Stability

The Financial Stability Board (FSB) recently released a report highlighting cryptocurrencies or “crypto-assets” as the board likes to call them.  The FSB commented on its sentiment regarding cryptocurrencies, stating:

“While the FSB believes that crypto-assets do not pose a material risk to global financial stability at this time it recognizes the need for vigilant monitoring in light of the speed of market developments.”

For the uninitiated, the FSB is an international body that consists of financial leaders and organizations, with an objective of making recommendations to G20 nations regarding optimal financial policies and practices. In the same report, the G20-affiliated body also laid out a framework for monitoring the cryptocurrency industry, with the FSB focusing on price volatility, ICO prevalence, institutional exposure and real-world transactional use as the primary indicators for threat assessment.

The sentiment regarding cryptocurrencies made by the organization was echoed by the U.S. Federal Reserve chairman at the U.S. House of Representatives earlier this week, who also stated that cryptocurrencies “aren’t big enough” to pose a financial threat at this time. However, just like the FSB, the Fed Chairman also indicated that he and fellow regulators will continue to keep an eye on the cryptocurrency industry moving into the future.

Japan’s Role As A Lead Cryptocurrency Regulator

Japan has long been held as a pseudo “crypto capital,” where cryptocurrency adoption and innovation is as widespread as other leading technologies. Despite widespread retail adoption and a growing crypto-based economy, Japan has one of the harshest regulatory climates around cryptocurrencies in the world.

Following the cryptocurrency rally of 2017, along with the subsequent $550 million hack of the Japan-based CoinCheck exchange, the Japanese Financial Services Agency (FSA) began to impose strict rules on crypto-affiliated firms in a bid to curb consumer risk and cases of money launderers utilizing cryptos in malintent.  The rules namely took the form of new rules regarding KYC/AML, cryptocurrency storage options and a ban on the trading of privacy-centric cryptocurrencies within Japan’s borders.

The fears of money laundering came up after a series of cases where criminals utilized privacy cryptocurrencies to move money anonymously, away from the eyes of regulators. A local Japanese news source highlighted an instance where an organized crime group located in Tokyo laundered 30 billion yen ($270 million) through Monero, ZCash, and Dash.

Speaking of cases like the aforementioned, an official from the FSA stated:

“It’s nearly impossible for Japan to handle the problem (money laundering) alone. Even if trade is restricted to only domestic transfers or monitoring is enhanced, it’s still not enough to counter money laundering. It would be best if all the group of 20 industrial and emerging nations and regions (G20) would take the same steps toward prevention.”

The issue with money laundering through cryptocurrencies has been a common theme with many regulators over the course of the past decade. The U.S. Fed chairman also noted:

“They (cryptocurrencies) are very challenging. Cryptocurrencies are great if you are trying to hide money or if you are trying to launder money. So we have to be very cautious and conscious of that.”

Due to Japan’s current position as a cryptocurrency regulation proponent, it is likely that Asia’s second-largest economy will continue to push a harsh stance regarding cryptocurrencies to fellow G20 nations as this space develops further.


Image from Shutterstock

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Japan: Internal Affairs Minister Denies Involvement in Crypto-Related Gov’t Investigation

Japan’s Internal affairs minister Seiko Noda has denied her involvement in a government investigation into the operation of a non-registered cryptocurrency exchange, local news outlet the Asahi Shimbun reported July 19.

In January, the Financial Services Agency (FSA) reportedly suspected a Tokyo-based company of violating the law by operating a non-registered cryptocurrency exchange. The FSA requested a written response to its concerns from the company, arguing that it “did not respond by the deadline given, it would report the matter to investigating authorities and take necessary steps.”

The document obtained by the Asahi Shimbun reportedly revealed that several days after issuing the warning, Noda’s office contacted the FSA, asking for an explanation of what had happened.

The matter reportedly concerns a meeting Noda’s office held with the FSA regarding the alleged company in the presence of the company’s representative. Noda reportedly denied that she brought pressure upon the FSA investigation, telling the Asahi Shimbun that the purpose of the meeting was to get “an overall general account of cryptocurrency exchanges.”

Noda also argued that she had “no vested interest in the company in question” and the decision by her office to request the meeting “obviously does not amount to exerting pressure.” Noda pointed out that she did not present at the meeting.

According to the Asahi Shimbun, an FSA official visited Noda’s office on January 30 to explain the agency’s position toward the regulation of funds raising by issuing cryptocurrency to Noda’s aide and the company’s representative. A senior official at the FSA emphasized that Noda’s office request for a briefing could be recognized as pressure:

“A public servant will likely take it as pressure if an aide to a sitting Cabinet member calls for a meeting in which an employee of a company the agency is looking into is also present.”

Noda subsequently admitted that her aide presented at the meeting, and commented on the allegation, saying:

“My aide and the employee of the company know each other. Since we received a request for details of the regulations concerning cryptocurrency exchanges, we arranged [for a meeting with the agency]. I was not aware of the agency’s warning against the company.”

Yesterday, the Japanese government announced that, in the interest of better preparing the agency to address regulatory issues of the modern era, the FSA underwent an organizational reshuffling. The newly created Strategy Development and Management Bureau replaced the Inspection Bureau, and will will develop a financial strategy policy and handle issues addressing the digital currencies market, fintech, and money laundering.

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Japan Revamps Financial Regulatory Agency to Address Issues in FinTech, Cryptocurrencies

Japan has overhauled its financial regulator, the Financial Services Agency (FSA), in order to better deal with fintech-related fields, including cryptocurrencies, news outlet Nikkei Asian Review reported July 17. Changes were made to various bureaus in order to make the organization more suited to address new problems and challenges in the financial sector.

Starting today, the newly created Strategy Development and Management Bureau, which replaced the Inspection Bureau, will reportedly develop a financial strategy policy and handle issues addressing the digital currencies market, fintech, and money laundering. Additionally, the bureau will be responsible for administrative duties and inspection of financial institutions.

The Policy and Markets Bureau will succeed the Planning and Coordination Bureau, and is tasked with developing a legal framework that addresses the rapid growth of the fintech sector. The Supervision Bureau remained unchanged. 

The FSA has initiated enforcement actions against several crypto exchanges this year. In March, the agency sent “punishment notices” to seven crypto exchanges and temporarily halted the activities of two more after a round of inspections. Last month, the FSA issued business improvement notices to five registered exchanges, alleging that the exchanges lacked proper internal management systems, including anti-money laundering measures.

Earlier this month, the FSA announced it was considering changing the legal framework for regulation of cryptocurrency exchanges. The FSA was planning to regulate crypto exchanges via the Financial Instruments and Exchange Act (FIEA), instead of its legal foundation, the Payment Services Act. This reportedly means that exchanges will have stronger customer protections. The FIEA obliges securities companies to manage customer funds and securities, such as stocks, separately from corporate assets.

In June, Japan’s Minister of Finance Senator Fujimaki asked Deputy Prime Minister Taro Aso whether crypto transactions should be taxed via a “separate settlement taxation,” rather than their current classification as “miscellaneous income.” Aso said the prospect was “doubtful” citing concern over the public’s reaction due to “tax fairness.” Changing the tax scheme would bring the current tax rate for crypto transactions from a maximum of 55 percent to a 20 percent flat tax similar to stocks or forex trades.

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