Japan has reportedly urged other countries, including the US, to regulate cryptocurrency exchanges like they do banks. A senior official at the Financial Services Agency explained that FTX’s recent implosion was not caused by crypto but by “lax governance, lax internal controls, and the absence of regulation and oversight.”
Cryptocurrency regulations at the bank level
The Japan Financial Services Agency (FSA), the country’s top financial regulator, has urged regulators globally to bring cryptocurrency exchanges under bank-level regulations, Bloomberg reported Monday. Mamoru Yanase, Deputy Director General of the FSA Office of Strategy Development and Management, was quoted as saying:
If you want to implement effective regulation, you need to do the same thing that you regulate and supervise traditional institutions.
The FSA has called for stronger crypto regulation following the collapse of crypto exchange FTX and subsequent fraud charges brought against its former chief executive officer Sam Bankman-Fried (SBF). The FTX collapse has dealt a heavy blow to the cryptocurrency industry, highlighting the gaps and differences in regulations around the world.
Japan’s strict regulatory framework for crypto assets has provided a measure of protection for local investors, as they are expected to be able to withdraw their funds next month from two FTX-linked Japanese crypto exchanges.
Commenting on the failure of FTX, Yanase opined:
What sparked the latest scandal isn’t crypto itself… It’s lax governance, lax internal controls, and a lack of regulation and oversight.
According to Yanase, the FSA has “began to urge” its counterparts in the US, Europe and other regions to subject cryptocurrency exchanges to the same level of supervision that traditional financial institutions such as banks and brokerage houses are subject to. bag.
Noting that countries may need to set up a multinational resolution mechanism to coordinate when large crypto firms go bankrupt, Yanase highlighted the importance of achieving consistency in regulations around the world.
The FSA official stressed that countries “need to strongly demand” measures from crypto exchanges to ensure consumer protection, curb money laundering and implement strong governance, internal controls, audits and disclosures. He added that regulators should also have the authority to take compliance measures, such as on-site inspections, to ensure that crypto firms are properly managing customer assets.
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