Japan Prepares to Regulate Digital Currencies and Embrace the Blockchain

A dedicated working group at Japan’s Financial System Council is said to have prepared a draft proposal as to providing regulation framework for digital currency.

As of January 4 next year the group will commence elaborating the proposals, which eventually shall underpin the local Financial Services Agency’s policies and in regard of operations with virtual currencies.

The basis of the proposals is already known, and incorporates standard monetary regulation measures found in most regulation attempts throughout the world. They include the requirements of registering virtual currency operators; inspections carried out by duly certified accountants or auditors on a regular basis to check whether they are handling their assets in compliance with the requirements; standard AML regulations including KYC policies, which implies that the operators will have to identify their customers; and certain requirements for cryptocurrency exchanges specifying the minimum amount of handled assets and debarring them from operating corporate assets together with customer assets.

The latter requirement almost clearly refers to Mark Karpeles, who had been arrested in Japan in connection with the Mt.Gox case as early as this August.

The move indicates a further shift towards accepting digital currency technologies in Japan. Recenlty, SBI Sumishin Net Bank, which is a joint venture between the country’s major bank Sumitomo Mitsui Trust Bank, and local financial services company SBI, announced it was going to proceed with developing a PoC (proof-of-concept) in order to explore blockchain technologies for banking. Further details of the project are unknown to date.