Two of the world’s most respected digital currency countries are reviewing their regulatory frameworks this week. Japan has re-categorized terms for digital currencies, while regulators in Hong Kong want to impose more controls on digital currencies and trading platforms.
Japan’s Financial Services Agency (FSA) has changed its currency rating
The Japanese Financial Services Agency has taken steps to include digitization and currency in a single category called “encrypted assets”. According to local media, the move was carried out to reaffirm that the government does not consider it a regular currency. Last week, an advisory committee concluded that the term “virtual currency” might lead investors to believe that the currency was treated as a currency. The rating was changed to reduce any misunderstanding.
The relevant laws will be changed to suit the new class of assets, especially those related to payments services that would have prevented dealing in virtual currencies. The leader of the Group of 20 countries said in March that digital currencies lacked the basic element of currency holdings and should therefore be classified as “encrypted assets”. By complying with this statement, Japan is compiling regulations to protect investors, and digital currency companies will be subject to a cash management system that determines the cash flow of the company.
Hong Kong tightens regulations on digital sector
Companies in Hong Kong that operate in digital currencies must abide by regulations established by the Securities and Futures Commission. Since China issued a complete ban on all digital currencies, Hong Kong has become an active platform for the digital sector, especially the ICO.
The increasing concern about money laundering and fraud has prompted the regulatory body to look again, the Nikkei Review Review said. The guidelines stipulate that investment funds with more than 10% dedicated to conducting currency trades need to obtain a license. They are also allowed to sell only to professional investors, not to the general public.
Trading platforms and companies will have the opportunity to test products in a controlled regulatory environment before deciding to apply for a license. Another requirement for those wishing to organize an ICO is to have a plan showing all the stages in which the initial currency will pass for at least one year.
Hong Kong regulations will also focus more on “Know Your Customer” processes to prevent false activities. Some have warned that regulations may be stressful for some companies wishing to maintain their market share. There is also concern that formal licensing may increase trading costs, although to counter it, it may also encourage more institutional investors to enter the market they now see as safer.