Japan is Trusting The Cryptocurrency Industry to Regulate Itself
By Hermione Daguin
Japan is making an unprecedented move within the cryptocurrency industry - letting the industry regulate itself. Regulating the cryptocurrency industry has been on the mind of every country in the world. Most of them have tried and failed. The industry continues to have its ups and downs. People have yet to understand it completely to make concrete rules that cover every possibility.
This frustration led to the announcement from the global money laundering watchdog stating that they will come up with a set of regulations. This organization is supposed to create guidelines that every single country has to follow in regard to regulating cryptocurrency. However, it looks like Japan is not waiting for these new regulations. Instead, it proposed that the industry can regulate itself. Its argument is that the industry is evolving too quickly for policymakers. Policymakers would have to take time to understand each new event and try to come up with a rule to cover it. Meanwhile, the industry already understands itself and is always aware of new stories and discoveries. Therefore, they are best equipped to regulate themselves.
The Japan Virtual Currency Exchange Association (JVCEA) is a self-regulatory organization made up of representatives from cryptocurrency exchanges. Japan’s Financial Services Agency has granted them the authority to create regulations for all cryptocurrency activities in order to guard against scams, money laundering, and protect consumers. JVCEA also has the power to enforce the rules and punish those that don’t comply with them. This new policy will first apply in a trial method. Japan will observe closely to assure that both the domestic industry and JVCEA are correctly applying and following regulations that’s in the best interest of the consumers.
There are many uncertainties with the new move. First, JVCEA had two high-profile resignations this year alone. Both of its vice-presidents had to leave to focus on their own exchanges that were facing regulatory compliance demands. Second, Japan has suffered multiple high-profile hacks recently. Cryptocurrency exchanges Coincheck and Zaif were both hacked this year and lost millions of dollars each.
Nonetheless, people are watching Japan closely. The country is known as one the most advanced countries when it comes to regulating cryptocurrency. Thus, other countries are observing to see whether this new policy is worth implementing, too. If it works, expect more countries to try it. Brian Quintenz, a commissioner for the US Commodity Futures Trading Commission, is already campaigning for American cryptocurrency exchanges to consider self-regulation.
If JVCEA manages to prove itself capable of self-regulating, it would be a big sigh of relief from across the globe. Policymakers everywhere have been scramming to regulate the industry in their countries to no avail. This would mean that they can rest easy knowing that people who understand the industry is in charge of it. However, reluctance is to be expected. People already don’t trust the industry. Even if JVCEA succeeds, there would be doubts and many countries may never actually grant full authorization for self-regulation.
Also, this policy may go against the regulations that the global money laundry watchdog has decided to set. There are too many factors that push against it instead of for it. Self-regulation is about trust and most people wouldn’t agree to give away total trust when money is involved. The move seems like the ultimate solution, but it’s not doable in a global scale. We still have to wait for what the Paris-based Financial Action Task Force (FATF) is proposing.