Japan’s Financial Services Agency proposes lightweight legislation for non-exchange crypto intermediaries

Japan is considering new lightweight legislation for crypto intermediaries that are not crypto exchanges. The Financial Services Agency (FSA) recently presented its ideas to the Financial System Committee’s Payment Services Working Group. Japan introduced legislation for crypto asset exchange service providers (CAESPs) in 2017, covering the buying and selling of cryptocurrencies, acting as a broker, managing funds related to these services, or providing custody. However, many so-called introducers that do not operate crypto exchanges do not consider themselves CAESPs. As a result, the FSA is considering proposals to require them to register as intermediaries. Introducers would be obliged to provide information to users, would be subject to advertising restrictions, and could be liable for damages if things go wrong. The FSA is also considering how to handle damages. Current regulations for other financial services intermediaries that are not part of a larger group require a security deposit to cover potential damages. If the intermediary is affiliated with a crypto exchange, the damages could be borne by the exchange.