Japan’s top financial regulator has called on other countries to subject cryptocurrency exchanges to the same level of oversight as banks. According to a senior official of the Financial Services Agency, the recent implosion of FTX was caused by “lax governance, lax internal controls, and the absence of regulation and oversight”.
Bank-Level Crypto Regulation
Mamoru Yanase, Deputy Director General of the Financial Services Agency’s Strategy Development and Management Office, said that regulators must implement effective regulation to supervise and regulate crypto institutions in the same way as traditional ones, according to a report by Bloomberg on Monday.
If you are to be successful, you must impose the same level of supervision and regulation on cryptocurrency exchanges as you do for traditional institutions.
The FSA’s call for stronger crypto regulation was prompted by the collapse of the crypto exchange FTX, and subsequent fraud charges against its former chief executive officer Sam Bankman-Fried (SBF). The incident has highlighted the differences and gaps between regulations in different parts of the world.
The strict regulations on crypto assets in Japan have provided some protection to local investors. Japanese investors are expected to be able to withdraw their funds from two FTX-linked banks next month.
Commenting on the FTX failure, Yanase stated:
What happened is not related to crypto – it is lack of regulation and oversight, lax governance, and internal controls.
Yanase noted that the FSA has been asking its counterparts in the US, Europe, and other regions to give cryptocurrency exchanges the same level of supervision as traditional financial institutions such as banks, brokerage houses and insurers.
To coordinate in the event of a large-scale crypto firm failure, multiple countries may need to set up a multilateral resolution mechanism. Yanase highlighted the importance of achieving consistency in regulations across the globe.
The FSA official added that countries should also take strong measures to ensure consumer protection and prevent money laundering. Crypto exchanges need to have strong governance, internal controls, and audits, and regulators should have the power to enforce compliance measures such as on-site inspections to ensure that crypto companies are managing client assets properly.
What do you think? Should other countries regulate cryptocurrency exchanges as banks? Please let us know your thoughts in the comments section.
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