Japan's Financial Regulator Issues Draft Guidelines For Funds Investing in Crypto

Japan's Financial Services Agency has issued draft guidelines for funds investing in crypto.

The Sept. 30 announcement, which mentions crypto assets in the introduction but only alludes to them in text of the proposed amendment itself, is latest move by the authorities in the country to prudently manage the development of the market without shutting it down.

"It is anticipated that financial products that invest in crypto assets will be formed in the future," the agency notes in the introduction to the proposed revisions to Supervision Guidelines.

"But there are also indications that investment in crypto assets is encouraging speculation. The agency believes that it should carefully handle the formation and sale of investment trusts that invest in such assets."

They advise funds to exercise caution when investing in assets outside the original objective of the trust and advise them to evaluate potential risks, such as those relating to volatility and liquidity.

It refers to the worrying investments as "Non-specific assets."

"In the revised bill, virtual currency is not mentioned," notes the Zaikei newspaper, though it reported on the revisions as dealing with crypto assets by referencing the introduction.

The country was rocked by the collapse of Mt Gox in 2014 and the 2018 hack of the Coincheck exchange and has been working to reestablish the crypto market on a better footing.

Since early 2018, the FSA has been fine-tuning the regulatory framework for exchanges and establishing a framework for crypto offerings, and in early 2019 amendments were proposed to Payment Services Act and the Financial Instruments and Exchange Act.

In the first half of 2019, the FSA approved three new exchanges after approving none in 2018.