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Japan’s Financial Services Agency (FSA) last week announced its plans to regulate cryptocurrency wallet services, Bitcoin.com reported.
At the recently held ninth cryptocurrency study group meeting, the regulator proposed a plan to regulate crypto wallet services and their providers.
Under the country’s fund settlement law, businesses offering cryptocurrency-related services, such as buying and selling, are required to register as crypto exchanges with the FSA. However, wallet service providers are not targeted by current laws as they do not engage in buying and selling of cryptocurrencies.
The regulatory measures proposed by the FSA focus on wallet service providers – not software wallet developers or hardware wallet manufacturers. The FSA said that these regulations will be in line with the international Anti-Money Laundering/ Counter Financing of Terrorism (AML/CFT) standards set by the Financial Action Task Force (FATF).
The regulator stressed on the implementation of the “revised FATF standards”, including their recommendations relating to cryptocurrencies exchanges, wallet service providers, and initial coin offering (ICO) issuers.
The meeting also discussed the risks associated with wallet services, such as theft during cyber attacks, wallet failures, money laundering, and other risks shared by cryptocurrency exchanges.
“Possible regulatory measures include the maintenance of internal control systems, separate management of cryptocurrencies belonging to the service providers and customers, audits of financial statements, publication of policies in the event of stolen funds in a hack and retaining funds to repay customers,” Bitcoin.com said.
In addition, the group also discussed the transition period for introducing the regulations. During this transitional period, service providers would not be able to add new businesses, customers, or coins to their platform. They would be required to post notices on their websites regarding their registration status.
According to the meeting document, those refusing to register must declare on their websites and “indicate that the business will be abolished.”
