The Financial Services Agency (FSA) in Japan has approved Huobi Token as a compliant crypto-asset capable of trading in the world’s second largest digital asset market since May. HT has become the first international exchange token approved by Japanese regulators.
At this point, only 25 additional tokens have been approved on the FSA’s whitelist as Japan tightens regulations to better define crypto-assets.
The Japanese House of Representatives last year revised the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA), with enforcement effective from May 1.
Law firm Morrison & Foerster LLP reports some of the amendments will reinforce investor protection in crypto-assets. A recent company blog explained that even custody providers who are not engaged in the business of selling, buying, and intermediating crypto-asset sales will be subject to the new PSA regulations.
Additional Regulations for Crypto Exchanges
Crypto asset derivatives will also be audited under the FIEA regulation and related companies will need to register in order to function within the Japanese crypto industry. Crypto-asset derivatives transactions settled by crypto-asset delivery — previously regulated under the PSA — will also form part of the FIEA mandate.
Providers with crypto-assets of customers in custody must register after May 1 as a crypto-exchange provider
Among the customer asset requirements proposed in the PSA amendment, the protections surrounding user fiat custody are notable as these deposits must be held in a trust account. Exchanges are required to keep digital assets in, or their equivalent, cold wallets.
The regulations also stipulate that 5 percent or less of the aggregate value of the customer’s assets held in custody must be a portion of such assets held in a hot wallet. A report by Tokyo-based law firm So & Sato stated that Japan’s strict regulations are likely to benefit new players in the long run.