Interpretation of Japan’s encrypted asset policy, compliance, regulatory measures and the process of applying for/establishing an exchange!
Since Jasmy set up the community of coin-holding club, a large number of enthusiasts have joined in, during which, more than one user participated in the exclusive incentive plan for obtaining Token by claiming a task.
Recently, enthusiasts in the community have also discussed and asked many questions with Mr. Yuki, the channel marketing director of the Jasmy headquarter in Japan. Let’s take a look ~
Q1 What is the current policy of Japan’s token market?
If you want to invest in Token, you need to know the relevant Japanese market. When it comes to the token market, one country that cannot be ignored is Japan. In this country, tokens get special attention, with unprecedented status. Japan is not only the first country in the world to enact laws related to encrypted asset, but also to take strict regulatory measures. Japan has strict and perfect laws and regulations, which can fully protect the legitimate rights and interests of investors.
In Japan, token exchange listing is equivalent to floatation of shares, which needs to experience complicated review process for a very long period.
(* Note: encrypted asset is a Japanese term, which means “crypto asset”)
Q2 What regulatory measures and models do Japan have in terms of token market regulations?
At present, the encrypted asset markets in Korea, Germany, the United States and Canada are very active, but their effect of regulation and compliance are relatively weak compared with those in Japan. Japan has a long history of development and a solid foundation in the supervision and regulation of crypto asset market. Compared with many countries that have only a law on encrypted assets, Japan has successively issued three core codes and revised relevant auxiliary laws and regulations from 2016 to 2019 alone.
Moreover, Japan’s regulatory pattern of encrypted assets is exactly the same as that of stock and other securities markets, which can be said to have cured the legal loopholes and blind spots comprehensively, and it can be called the most strict and standardized market in the world, which can better protect the rights and interests of the investment user.
(* Note: encrypted asset is a Japanese term, which means “crypto asset”)
Q3 How to set up a new exchange in Japan?
According to Japan’s “Law on Correcting the Capital Clearing (Delivery / Settlement)” issued in 2017, a new exchange to be opened in Japan must be reported to the Financial Services Agency, and then must pass the review of both Japan Virtual and Crypto assets Exchange Association (JVCEA) and the Financial Services Agency.
Finally, the relevant documents should be submitted to the Prime Minister of Japan, which will take effect after being sealed. Only in this way can we finally get a license to engage in the business of the encrypted asset exchange.
The Financial Services Agency and the State Administration of Taxation will subsequently investigate and evaluate the business and other conditions of the exchange and operating companies from time to time. The license will be withdrawn once there are irregularities or risks identified by the Financial Services Agency.
Interview and review process of the Financial Services Agency when applying for a license
- The first step is to submit the application. The company’s management team will be interviewed by the Financial Services Agency, explaining the company’s operating plan, business content, risk control / handling methods and internal management system
- After passing the first step, the second step is to submit all kinds of required information to the Financial Services Agency, entering the information review stage. The information to be submitted mainly includes the followings:
(1) Risk management system of encrypted assets
(2) Measures to protect the rights and interests of encrypted asset investment user
(3) Measures to prevent money laundering and the provision of funds to terrorist organizations
3. After successfully passing the information review, the officials of the Financial Services Agency will conduct on-site inspections and assessments, including on-site confirmation of the authenticity of the submitted materials, the office space, the employees, the formulation and implementation of internal regulations, and the live demonstration of risk management, etc.
The seemingly simple process is actually quite time-consuming. Generally, it takes at least 1 year to complete the entire process. In addition, it also needs to spend a large sum of money, including attorney fees and judicial information costs, which nearly cannot be handled by the general company without solid financial strength.
As of April 2021, there are only 27 licensed companies in Japan. In 2020, only 4 companies have obtained licenses. Compared with many countries which issue dozens of licenses in a year, it shows that the Japanese Financial Services Agency is cautious and rigorous in issuing licenses.
Q4 Given that the Japanese market is so standardized, what are the application procedures for a new crypto asset exchange listing in Japan?
In 2019, the Law on Correcting the Transaction (Trading) of Financial Commodities and the Law on Correcting the Marketing (Selling) of Financial Commodities, the encrypted asset * is officially listed as the same financial products as bank financial products, stocks or other securities, that is to say, in Japan, the encrypted asset exchange listing is equivalent to floatation of shares.
After the listing, it must be operated in strict accordance with market regulations just like stocks, and be closely supervised and inspected by the Financial Services Agency from time to time.
Therefore, Japan’s review of the application process for encrypted asset exchange listing is the most secure and complex in the world.
Moreover, the exchange which lists the token for the first time in Japan need to bear all joint guarantee responsibilities, that is, once there is any violation of the encrypted assets or any behavior that is not conducive to investment users, the exchange will be held accountable by the Financial Services Agency, and if the circumstances are serious, the Japanese government will revoke the exchange license.
The general review process of the encrypted asset exchange listing is as follows:
- The exchange conducts a comprehensive review of the encrypted assets for which the listing application is submitted.
- The encrypted assets are reviewed by the Japan Virtual and Crypto assets Exchange Association (JVCEA).
- JVCEA will seek advice of Japan Financial Services Agency.
- Japan Financial Services Agency conducts final review.
- After filing in the whitelist, wait for the official listing
