Japan FSA, JVCEA Vie Over Self-regulation Amid Crypto Winter

Keeping aside the frostbites of crypto winter and the ruin of global investors, Japan celebrated Japan Blockchain Week 2022 from July 6 to July 18. The major part of this event was the three-day long 14th annual IVS crypto conference which hosted over 1,600 executives and industry experts and unveiled umpteen opportunities blockchain technology offers.

Held in Naha, Okinawa, this invite-only jamboree exclaimed “The Future has Arrived” as their slogan. However, the slogan’s tone was contrastingly different in the capital city, Tokyo, where the nation’s pioneering and bold crypto experiments occur.

According to a report by Financial Times, industry experts, executives, lawyers, and financial regulators are alarmed by a spiraling regulatory crisis griping over the country’s multibillion-dollar digital asset business.

In an extensive interview, one of the industry experts quoted:

When Japan decided to experiment with self-regulation of the cryptocurrency industry, many people around the world said it would not work. Unfortunately, right now it looks as though they may be correct.

Despite hosting its first Blockchain Week, Japan is facing some critical backlashes regarding self-regulation amid the crypto meltdown. Lately, major disagreements have riled the Japan Virtual Currency Exchange Association (JVCEA), a body established in 2018 to form a global precedent for the crypto industry’s self-regulation.

Initiated by the members of Japan’s 32 licensed crypto exchanges and former government officials, JVCEA staff admitted being under the grip of crisis and existential threats.

To defiance for Japan, the members of JVCEA’s secretariat have created a union in an attempt to protect themselves, although the Japanese Financial Services Agency (FSA) has repeatedly criticized the organization for its poor governance.

FSA cited the dearth of communication between the JVCEA directors, secretariat, and operating members as the primary reason behind the poor governance and mismanagement in the organization.

The crisis is a repercussion of a series of events that involves corrosive infighting and a chronic lack of resources, a stand-off with regulators, a sham in Japan’s approach to virtual currencies, and the country’s status as a leading global center for virtual asset trading activities.

Last December, the FSA issued an “extremely stern warning” against JVCEA. Financial Times quoted people familiar with the matter, stating the regulators have been concerned about the delays to crucial anti-money laundering regulation.

The minutes of the last year’s annual board meeting reveal that it was unclear “what kind of deliberations the body was having, what the decision-making process was, why the situation was the way it was, and what the [responsibilities] of the board members were.”