The Japanese House of Representatives have announced that the Payment Services Act (PSA) and Financial Instruments and Exchange Act (FIEA) will be enforced starting with May 1, 2020.
The two of the pieces of legislation were passed by the Japanese House of Representatives in 2019 to regulate crypto and were scheduled to come into effect starting in April 2020. However, with unexpected delays, no enforcement date had officially been set until last week.
The PSA changes the basic terminology to tightening restrictions on crypto custodians; ‘crypto asset’ to be used instead of ‘virtual currency’. Furthermore, crypto exchanges operating in Japan from May 1, 2020 will have to manage users’ money separately from their own cash flows. This means finding a third-party operator to keep hold of their clients’ money and using cold wallets to do so.
If users insist on using hot wallets, exchanges will have to hold the same type and amount of crypto assets as their users to properly reimburse them in the event of theft.
Revisions to the FIEA include the concept of electronically recorded transferable rights (ERTRs) to define that initial coin offerings (ICOs) and security token offerings (STOs) would be regulated under the act. From May 1 onward, crypto asset derivatives transactions will be regulated under the FIEA.
In general, the FIEA prohibits anyone in Japan from engaging in activities such as dissemination of rumours, or the use of fraudulent means to sell, purchase, or engage in any crypto asset or derivatives transaction.
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