Japan's Financial Services Agency (FSA) is drafting new laws to prevent domestic assets from being transferred out of the country in case foreign crypto exchanges go under.
Japan's Financial Services Agency (FSA) is drafting new laws to prevent domestic assets from being transferred out of the country in case foreign crypto exchanges go under. The move is the latest lesson learned from past industry turmoil, such as the FTX collapse.
The plan to amend the Japanese law on payment services will propose a "holding order" mechanism whereby the current rigid regulation, which has so far been applied only to those firms registered under the Financial Instruments and Exchange Act, would now be extended in its expanded form to include all virtual currency exchange companies falling under the Payment Services Act, further extending protection to Japanese investors.
Under the new regulatory regime, cryptocurrency exchanges would not be allowed to transfer assets of Japanese residents to foreign entities in case of a financial crisis in the country. This is a measure to prevent situations wherein local investors lose money due to bankruptcy by exchanges operating overseas.
This is especially curious in light of the fact that such a reinforcement of regulations would be raised at this particular time, given the pre-existing protective measures for Japan. Currently, there are 29 exchanges under Japanese registration, both domestic and international, where domestic platforms are already required to have strict rules regarding the prohibition of asset transfers overseas.
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