Japan’s Financial Authority Progresses On Bitcoin Regulation

According to a latest report from Japan Times, a working group under Japan’s Financial System Council has compiled a draft proposal that focuses on regulating virtual currency businesses.

Starting today, the working group is said to hold discussions before drawing up a final report containing its proposals. This report will form the basis for the Financial Services Agency (FSA) to prepare a legal framework for regulating virtual currencies and exchange operators during next year’s Diet ordinary session, which is scheduled to start on Jan. 4.

According to the Japan Times, the proposals incorporated in the draft include:

• Mandatory registration of operators of virtual currency exchanges with the FSA.
• Virtual currency exchange operators should meet certain conditions, such as maintaining a certain amount of capital and requiring them to manage customer assets separately from their corporate assets.
• Mandatory checks on exchange operators by certified public accountants or auditing firms, which would assess how the operators are handling their assets and verify their financial statements.
• To counter money laundering, exchange operators should be obliged to confirm the identities of clients when they open accounts and report questionable trading to authorities. These requirements would be in line with requests from the Financial Action Task Force (FATF).

Nikkei Asian Review reported last month the FSA was planning to introduce a regulatory mechanism for virtual currencies including bitcoin as early as next year, following the arrest of Mark Karpeles in the infamous Mt Gox scam that exposed the almost non-existing bitcoin regulation in the country.