Japan’s accredited self-regulatory body for the crypto industry is simplifying a complicated screening process that digital tokens must undergo before being listed on local exchanges.
These rules will come into effect in December and have been approved by Japan’s top financial regulator, the Financial Services Agency.
But a Bloomberg report saying the Japan Virtual Currency Exchange Association (JVCEA) is trying to remove all coin screenings by 2024 is not entirely accurate, according to the body’s Vice Chair Genki Oda.
“This does not mean that the pre-screening process will be completely eliminated. JVCEA will continue to perform certain checks,” Oda said.
While Japan’s government is looking to establish strict anti-money laundering regulations for the crypto industry in line with global standards, it has also been trying to make life easier for startups in the country, which are currently burdened by heavy corporate taxes and complicated token listing requirements.
All crypto tokens are vetted by the JVCEA before they are approved for listing on local trading platforms. Currently, unless a token is already listed on at least three exchanges, it has to go through a lengthy pre-screening process to be allowed on additional exchanges.
The stringent requirement is limiting the number of tokens available for trading on Japanese exchanges, prompting local investors to turn to exchanges outside of Japan like Bybit and Binance in search of more choice, Oda said.
With the JVCEA’s new rules, if the asset is already listed on one exchange, other exchanges do not need to go through a pre-screening process to list the same asset.
“It is assumed each crypto asset exchange will conduct its own review,” Oda said in an interview with CoinDesk. The JVCEA will still make sure that each company conducts thorough reviews.
The rules, which were already shared with the crypto exchanges that make up the self-regulatory body, do not apply to assets that have been listed on foreign exchanges but not on exchanges in Japan. The loose screening requirements also don’t apply to project fundraises through initial coin offerings (ICO) and initial exchange offerings (IEO) as well as crypto assets like stablecoins.
“Many of the 31 exchanges are positive about this improvement,” Oda said, referring to JVCEA members.
Some members think the changes don’t go far enough, and have called for the rules to include assets listed on foreign exchanges.
“The entire Japanese crypto market will be damaged in the event that inappropriate crypto assets are [listed],” Oda said. “We have decided to exclude them from the scope.”
Backlog
A year ago, crypto asset screenings in Japan were messy. More than 80 crypto assets were stuck in a backlog awaiting review, and only up to five of them were reviewed each month. Even listing bitcoin or ether on an exchange could take at least a month.
The JVCEA has cleared the backlog of assets that could have been stuck in a queue for two years. Currently less than 10 assets are in need of vetting, Oda said, adding that the association has five to eight staff members dedicated to reviewing assets. On average, they can review five to 10 new crypto assets per month, he said.
Trouble with regulators
Earlier this year, reports suggested there was a rift between Japan’s financial watchdog, the FSA, and the JVCEA. Financial Times reported that the FSA had issued warnings to the association and was displeased with its management. JVCEA staff had formed a union in response to workplace harassment from a member of management.
The manager in question has since resigned, Oda said. He told CoinDesk that the JVCEA and FSA have resolved management issues and have a “direct communication path.”
CoinDesk has reached out to the FSA for comment.
Oda said the JVCEA was next turning to clarifying accounting standards for crypto assets. JVCEA is preparing for discussions on how to conduct audits with the financial regulator and accounting firms.
