Digital currency exchange operators have to register with the Financial Services Agency (FSA), the government agency that oversees finance activities in the country. The action also comes with a grace period for businesses affected, as it will not come into force until one year from its approval.
The FSA began formulating its plans to regulate Bitcoin exchanges in 2014 when Tokyo-based Mt Gox has collapsed. The decision is influenced by the increased interest in startups to leverage Bitcoin and blockchain technology. The FSA itself has also become more vocal about the potential benefits of blockchain technologies, advocating in statements that the country needs to become a regional leader in its development according to coindesk.com.
bitFlyer and TechBureau, two local startups, received significant venture funding rounds, raising USD 27m and USD 6.5m, respectively in April 2016.
Reports indicated that the measure was passed as part of a larger update to national banking law to support the domestic fintech industry. The measures for digital currencies, by contrast, were fueled out of a desire for consumer protection and to prevent payment applications of the technology from assisting in terrorist financing.
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