The Japanese government has announced that The Payment Services Act (PSA) and Financial Instruments and Exchange Act (FIEA), meant to regulate crypto in the country will be enforced from May 1st, 2020. These acts were passed by the Japanese House of Representatives last year and were originally scheduled to be operational from April 2020. However, an official government newsletter confirmed that the laws will go into effect starting from May.
Interestingly, Japan does not have any official laws in regard to crypto. So the latest implementation of the amended PSA and FIEA are the only tools to regulate crypto in Japan.
About the Payment Services Act
Under the PSA, crypto holdings will be “crypto-asset” instead of “virtual currency”. Furthermore, the PSA will make it mandatory for crypto exchanges to handle user funds separately, and not together with their won cash flow. This essentially means that third-party services will be responsible to manage user funds via stuff like cold wallets.
In case the users wish to store their holdings in hot wallets, the exchanges will have to back those up with a similar kind and equal amount of crypto assets, in order to have the capability of reimbursing them in the event of hacks and other discrepancies risking user funds.
About the FIEA
The FIEA will implement the concept of electronically recorded transferable rights (ERTRs). These are basically tokens rolled out as per profit expectations. This will ensure that ICOs and STOs be regulated under the act.
Moreover, from May 1, crypto-asset derivatives transactions will also come under the regulatory boundary of the FIEA. The act will also prohibit crypto users in Japan from selling, purchasing and engaging in crypto-asset based derivatives transactions in a fraudulent manner.
It is being speculated that the implementation of the PSA and FIEA will help Japan is emerging as a ‘safe crypto-country’.