Japan fights with self-regulation during the crypto core melt

visions of an in-depth crypto crash and the ruin of global investors were recently pushed aside in a luxury hotel in Okinawa, where one of the most important annual conferences in the industry celebrated the possibilities of blockchain technology with influencers such as Mr. Block and Miss Bitcoin.

At the Jamboree, only with an invitation came together more than 1,600 managers and industry gurus to celebrate everything virtual. "The future is there," was the motto of the conference. The mood of the three-day event in Naha, said the head of a Japanese online exchange, was "alcoholic and optimistic".

Back in Tokyo, where the drier and quieter pioneering work takes place, which is connected to the bold digital currency experiment in the country, the sound was very different.

In detailed interviews with the Financial Times, industry leaders, lawyers and current and former financial supervisory authorities caused an alarm.

"As Japan, to experiment with the self -regulation of the cryptocurrency industry, many people around the world said that this would not work. Unfortunately, it looks like they could be right at the moment," said a person who is close to both industry and the government.

In the past few months, the Japan Virtual Currency Exchange Association - the body founded in 2018 to create a global precedent for the self -regulation of the crypto industry - have resulted in great disagreements.

The organization itself, said members from the country's 32 licensed crypto exchanges and including former government officials, are under the grip of a crisis that threatens their entire purpose.

The Japanese financial services authority has repeatedly criticized its poor government, and in an impressive act of the defiance for Japan, employees of the JVCea secretariat even founded a union to try to protect themselves.

The origins of the current crisis, which contains a patient situation with regulatory authorities, destructive power struggles and a chronic lack of resources, are in Japan's approach to cryptocurrencies and the country's status as a pioneering global activity center for trading in virtual assets.

Shortly before it imploded spectacularly in 2014, the MTGOX crypto exchange based in Japan was measured by Bitcoin's traded volume and other early cryptocurrencies.

as part of their subsequent efforts to protect individual investors and at the same time secure the country's status as a global center for a rapidly growing company, the government recognized cryptocurrencies as financial investments in 2017 as the first in the world.

Shortly afterwards, in the middle of an explosion of new stock exchanges and a massive investment boom of younger Japanese customers, the FSA set up the first system for licensing crypto exchanges.

At the same time, she started her experiment with the self -regulation of industry in the hope that in view of her own limited resources, she could rely on the JVCEA to monitor her own members and to develop dynamic new guidelines for industry.

Four years later, the regulatory authority does not seem to be satisfied with the results.

Protocols of the board meetings from December, which the FT have, describe that JVCea received an "extremely strict warning" from the FSA at the end of last year.

Confederation with the situation said that the supervisory authority was concerned about delays in the event of important regulations to combat money laundering and, as the protocol shows, it is not "clear what kind of consultations the body had, how the decision was, why the situation was and what was the responsibility of the board members".

The FSA also pointed out a lack of communication between the JVCea directors, its secretariat and the member operators, which led to poor management of the organization.

The latest market turbulence have led to both new and established cryptocurrencies had to go through a complete review process before new operators were able to act. In some cases it took six months to one year for a uniform currency to be checked by the JVCea.

"The supervisory authorities have pushed to issue regulations to combat money laundering. But industry has taken the time to work. There is a very strong please from the FSA to drive this forward," said Masao Yanaga, professor at Meiji University and JVCea board member.

yanaga said the JVCea lacked resources to get ahead quickly. He also expressed concerns that crypto exchanges are small operators, "if they are asked to implement high-ranking measures, it would be really difficult for them to react due to the lack of resources".

he added that the regulations to combat money laundering in the absence of international agreements about the exchange of customer data between stock exchanges were difficult to implement.

"The operators of the stock exchanges fear that even if we create these rules, they cannot implement them," he said.

a person close to the JVCea said that the office company mainly consisted of pensioners of banks, brokers and government agencies and not from members of member companies.

"That is why nobody really understands blockchain and cryptocurrencies. The whole mess shows that it is not a simple problem of government.

In response to a request for comment, the JVCEA said that it would make improvements in response to the concerns of the FSA.

Chairman of the JVCea is Satoshi Hasuo, President of the industry giant Coincheck, with appointed representatives of various operators and external experts on the board.

Although it has worked on accelerating the approval process, Hasuo said in the JVCea opponents that delays in the approval of coins create an unfair disadvantage for newer participants, as they try to compete with longer established actors such as Hasuos Coincheck.

The JVCea admitted that the process had been a long time due to the lack of qualified staff and that this had caused "inconvenience" for new members. But it added that it was not intended to prefer more established stock exchanges.

connoisseurs of the union said that it was founded by employees who were dissatisfied with the management decisions of management. Her demands that she has published on social media include the discontinuation of key figures at JVCEA.

Board member Yanaga admitted that it was "very unusual that a union was founded in such a small organization", and added that he "suspected that the employees of the understaffed administrative offices were under great pressure to process a lot to edit Coin applications".

The FSA and Coincheck rejected a statement.