Japan Enacts Regulation for Digital Currency Exchanges

Japan’s national legislature approved a bill on Wednesday to regulate domestic digital currency exchanges.

AccessTimeIconMay 25, 2016 at 1:19 p.m. UTC
Updated Sep 11, 2021 at 12:17 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

The upper house of Japan's national legislature approved a bill on Wednesday to regulate domestic digital currency exchanges, a move that comes nearly two years after discussions about how to regulate the technology first began.

According to a report by The Japan Times, the decision will now require digital currency exchange operators to register with the Financial Services Agency (FSA), the government agency that oversees finance activities in the country. The action also comes with a grace period for businesses affected, as it will not come into force until one year from its approval.

Reports indicated that the measure was passed as part of a larger update to national banking law that sought to boost the domestic FinTech industry. The measures for digital currencies, by contrast, were fueled out of a desire for consumer protection and to prevent payment applications of the technology from assisting in terrorist financing.

In statements, the Japan Blockchain Association (JBA), a regional advocacy group, praised the decision. Yuzo Kano, the organization's chief administrative officer, told CoinDesk:

"The JBA welcomes this new law and would like the thank the efforts of the lawmakers, FSA and related government agencies, and all other involved parties who helped see this bill through."

Included in the law are provisions mandating that such firms separate the oversight and management of fiat and virtual currency funds, as well as enforce anti-money laundering (AML) and know your customer (KYC) rules.

Deliberations on the measure began in earnest late last year, when the FSA began openly discussing how it might seek to classify bitcoin under domestic law. The agency eventually settled on the idea that bitcoin represented an “asset-like” or “property” value that echoes its classification by the Internal Revenue Service (IRS) in the US.

The FSA began formulating its plans to regulate bitcoin exchanges in the wake of the collapse of Tokyo-based Mt Gox, the now-defunct exchange service that collapsed just over two years ago.

The decision comes as interest in startups leveraging bitcoin and blockchain technology is growing domestically. In the past month, two local startups received significant venture funding rounds, bitFlyer and TechBureau raising $27m and $6.5m, respectively.

The FSA itself has also become more vocal about the potential benefits of blockchain technologies this year, advocating in statements that the country needs to become a regional leader in its development.

Diet image via Shutterstock


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.