Japan’s “self-regulation experiment” for its digital asset space is unraveling as disagreements between financial regulators the industry advocacy body deepen, according to a Financial Times (FT) report.
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The FT conducted “extensive interviews” with industry executives, lawyers and financial regulators who “sounded the alarm over a spiraling regulatory crisis in Japan’s multibillion-dollar virtual asset business,” according to the report.
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The Financial Services Agency (FSA), the country’s financial watchdog, has “repeatedly criticized” the Japan Virtual Currency Exchange Association (JVCEA), an advocacy group set up in 2018 to promote self-regulation in the crypto space, the report said.
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Meeting minutes obtained by the FT showed the JVCEA receiving an “extremely stern warning” from the FSA in two meetings last year. The regulator was concerned about delays in anti-money laundering (AML) regulation was not privy to deliberations and decision-making processes of the association, according to the report.
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The minutes also showed the FSA saw a lack of communication between JVCEA leadership and members, resulting in “poor management.” The association is made up of around 40 digital asset firms representing the industry.
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According to the report, the secretariat of the JVCEA formed a union for protection in what the report calls “a stunning act of defiance for Japan.”
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JVCEA board member Masao Yanaga told the FT that the JVCEA lacked resources, and that AML regulations were hard to implement because of a lack of international agreements on sharing data.
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The JVCEA also said it was making improvements in response to the regulator’s concerns.
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Regulators around the world are scrambling to ensure sturdy rules are in place after the recent market downturn saw a number of high-profile crypto companies collapse and $2 trillion wiped out of crypto markets in a matter of weeks.
Read more: How Not to Run a Cryptocurrency Exchange
