Japan is mulling new lightweight legislation for cryptocurrency intermediaries that are not crypto exchanges. Last week the Financial Services Agency (FSA) presented its ideas to the Financial System Council Working Group on Payment Services.
Japan was home to the Mt Gox cryptocurrency exchange that was hacked in 2011 and 2014. As a result, the country was ahead of most, introducing legislation for crypto asset exchange service providers (CAESPs) in 2017. This covers the sale and purchase of crypto, acting as a broker, managing money related to these services or providing custody. However, many so-called introducers who don’t operate crypto exchanges don’t consider themselves as CAESPs.
The FSA gave the example of a games app or self hosted wallet providing access to a third party app for crypto trading services and then switching back to the original app. In many cases, the FSA might consider the app operator is acting as an intermediary and hence it needs to register as a crypto exchange. However, it recognizes this is quite onerous if an organization is purely acting as an introducer and never touches any money.
Hence, it is considering lighter proposals that require them to register as intermediaries. The introducer would be obligated to provide information to users. They’d be subject to advertising restrictions, and potentially liable for damages if something goes wrong.
The FSA mulled how do deal with damages. Current regulations for other financial services intermediaries that are not part of a larger group require a security deposit to cover potential damages. Where the intermediary is affiliated with a cryptocurrency exchange, the damages could be borne by the exchange.
