The Japanese financial regulator has apparently urged other countries to bring cryptocurrency exchanges under the same supervision as banks. According to a senior official from the Financial Services Agency, the recent collapse of FTX was not caused by crypto, but by “lax governance, lax internal controls, and the absence of regulation and oversight.”
Bank Oversight of Crypto Exchanges
Bloomberg reported Monday that the Japan Financial Services Agency, the country’s top financial regulator, has asked regulators worldwide to bring cryptocurrency exchanges within bank-level regulations. Mamoru Yanase, Deputy Director General of the FSA’s Strategy Development and Management Office, stated:
If you want to put in place effective regulation, you must do the same as traditional institutions.
The FSA called for stronger regulation of crypto after the collapse and subsequent fraud accusations against its former chief operating officer, Sam Bankman-Fried (SBF). The incident has highlighted the differences and gaps between regulations in different parts of the world. Japanese investors have been protected by a strict regulatory framework regarding crypto assets, and are expected to be able to withdraw their funds from two FTX-linked banks next month.
Commenting on the failure of FTX, Yanase remarked:
What’s the latest scandal? It’s not crypto itself… It’s lax governance, poor internal controls, and a dearth of regulation and oversight.
The FSA official indicated that they have begun to urge regulators in the US, Europe, and other countries to place cryptocurrency exchanges under the same supervision as traditional financial institutions like banks and brokerage houses. To coordinate in the event of large-scale crypto firm failures, multiple countries may need to establish a multilateral resolution mechanism. Yanase also noted the importance of ensuring consistency across all regulations.
The FSA stated that countries need to strongly demand that crypto exchanges take measures to protect consumers, stop money laundering, and establish strong governance, internal controls and disclosures. Furthermore, regulators must be given the authority to conduct compliance inspections at sites to ensure that cryptocurrency firms properly manage client assets.
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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