Authorities in Japan have emphasized the need for strict oversight and regulation of cryptocurrency use.
Japan, which is trying to take a calculated approach towards engaging with the crypto sector, has joined India in asking for a collective global outlook towards the digital assets industry. Japanese financial regulators have urged global regulatory bodies to finalise that the crypto sector should be monitored just as traditional banks are, across the globe. Essentially, Japanese authorities have highlighted that the use of cryptocurrencies must be highly controlled. Japan has blamed loose sector governance for the collapse of promising crypto projects like the FTX.
Mamoru Yanase, Japan’s deputy director-general of the Financial Services Agency’s Strategy Development and Management Bureau, asked other countries to think about immediate laws to regulate the global crypto industry.
“Crypto has become this big. If you like to implement effective regulation, you have to do the same as you regulate and supervise traditional institutions,” a Bloomberg report quoted Yanase as saying.
In the second half of 2022, over $200 billion (roughly Rs. 16,33,290 crore) was wiped off the global crypto market after promising projects like Terra and FTX collapsed due to liquidity crunches.
It is estimated that FTX users lost over a billion dollars in the dramatic downfall of the crypto exchange. As per Yanase, the crypto technology in itself is not to be blamed for these financial consequences that affected thousands of investors worldwide.
“It is loose governance, lax internal controls and the absence of regulation and supervision. What’s brought about the latest scandal isn’t crypto technology itself,” he noted.
The Japanese authorities have suggested global financial regulators to mandate crypto firms to vouch for secure internal functioning, conduct regular audit of reserves, and disclose suspicious activities to the relevant authorities.
Currently, India is also presiding the G20 group of nations for a year. Under its leadership, India aims to formulate rules around crypto that would work on an international level.
The members of the G20 — including Argentina, Australia, Brazil, Canada, China, and France, among others — are already reviewing a draft of a legal framework around the crypto sector. Previously, German authorities have also urged for global rules to shape up the crypto sector, to ensure financial stability of all nations that are not banning the sector.