Relatively loose Japanese laws designed to facilitate the use of cryptocurrencies at the retail level will soon be revised to reflect their actual use as speculative investments, Japan Times reports.
Initial laws enshrined in April 2017 made Japan was one of the first powerhouse economies to give what was largely regarded as a progressive regulatory nod to the entire crypto sector.
But now, according to Japan Times, largely speculative crypto behaviour as well as high profile hacks like the one at Tokyo-based Coincheck exchange in January 2018, are leading regulators to revise their understanding of so called “cryptocurrencies.”
In the Coincheck hack, hackers made off with over $500 million NEM tokens near the top of the market.
According to CCN, the tokens were never recovered and the search for them called off when blockchain forensics revealed that hackers had successfully laundered the tokens.
In the aftermath of the hack, Coincheck administrators admitted they’d been storing customer tokens in a “hot wallet,” meaning a wallet connected to the Internet, an egregious violation of basic crypto custodial protocol.
Huge crypto valuation run ups in 2017, including a 10X increase in the value of Bitcoin and even steeper rises and falls in smaller cap cryptos have meant the speculative mania surrounding crypto can no longer be denied, Japan Times writes:
“(S)peculative investment in cryptocurrencies increased steeply due to sharp rises in their value, making it essential for the Financial Services Agency to create regulations that respond to the situation.”
The Times claims that trading of five top crypto tokens in Japan multiplied 20x in 2017, and an official at a Japanese crypto exchange told the Times that young users trading crypto in 2017, “increased at a breathless pace.”
Cryptocurrency trading presently sits outside the scope of Japan’s Financial Instruments and Exchange Act. As a result, says a Japan Financial Services Agency official, dubious practices, including insider trading, have gone essentially “unchecked.”
According to one expert advising regulators on a panel this year, the loose 2017 laws designed to smooth retail crypto must be revised to designate, “Virtual currencies…as assets for investment,” and regulators must establish, “a legal system to protect investors needs…as a matter of urgency.”