Japan’s Financial Services Agency (FSA) plans to tighten Japan crypto regulation. It focuses on cryptocurrency lending and Initial Exchange Offerings (IEOs). The goal is to protect inexperienced investors. It seeks to ensure accurate risk disclosures and secure custody, closing regulatory loopholes.
The FSA concluded that crypto lending must be regulated under the Financial Instruments and Exchange Act. It also proposed limits for IEOs. This aims to prevent overinvestment. Japan has been enhancing its crypto asset laws and taxation since April. The FSA plans to classify cryptocurrencies under this act by 2026, changing their current status.
Is the FSA Looking to Close a Loophole Allowing Unregistered Operations?
The FSA found that managed staking requires registration, but crypto lending does not. This allows unregistered firms to operate. Concern exists that these firms may not maintain cold wallets or segregated funds. Users bear price and credit risks. The new policy requires crypto businesses to manage sub-lending and staking risks. They must establish robust custody controls and clearly explain risks. Advertising will also be regulated.
Services were found to limit repayments or promise high interest rates (up to 10%). Some lacked efficient risk controls, like asset confiscation (slashing) or loan defaults. FSA committee members proposed investment caps on crowdfunding. This will prevent overinvestment.
IEO issuers do not require financial audits if raising funds from many general investors. It was proposed to limit investments over 500,000 Yen to 5% of revenue or net assets, up to 2 million Yen. In 90% of past domestic IEOs, purchases were less than 500,000 Yen. Japan crypto regulation seeks a balance between protection and innovation.
