Japan’s Financial Services Agency (FSA) has solidified its position regarding applying the Financial Instruments and Exchange Act to the collection of investment funds in cryptocurrency, according to a January 8 report by the Sankei Shimbun, a major Japanese newspaper.

The Financial Instruments and Exchange Act prohibits unregistered companies from soliciting investment funds in cash, however there is no mention of cryptocurrency. The issue with this status quo was brought to light in Japan with events such as the 2018 fraud case against investment company Sener, which solicited investment funds promising monthly returns of 3-20%, with an unauthorized collection of approximately 8.3 billion Japanese yen worth of cryptocurrency.

The FSA pointed out in October 2017 that investment financing that uses cryptocurrency could become subject to the Financial Instruments and Exchange Act and other regulations. The agency also held regular discussions with industry experts throughout 2018 regarding cryptocurrency regulation, offering the opinion at these meetings that cryptocurrency should be taken up as marketable securities (like stocks) under disclosure regulations in terms of illicit activities through cryptocurrency and fund procurement. While cryptocurrency regulations are specified in the Payment Services Act in Japan at present, the law did not cover items such as market manipulation or fund procurement.

Although there are increased hurdles foreseen for fundraising through initial coin offerings for start-ups’ market entry in Japan in the future, investor safeguards are also expected due to further clarifications in relevant regulations for fraudulent fund procurement.

Bloomberg reported on January 7 that the FSA is investigating the degree of interest in cryptocurrency ETFs in the finance world and whether they should be approved. Last year, the agency adopted a dismissive posture on Bitcoin futures and Ethereum options, stating that it was difficult to acknowledge a clear “social significance” for the instruments. However, according to Bloomberg’s anonymous source, it is highly possible that the FSA investigation’s conclusions on ETFs will be submitted by Japan’s Liberal Democratic Party in March this year. The conclusions are considered to be used as guidance for legislation related to cryptocurrency.

There is also a possibility that many important law reforms will take place in Japan in 2019, including whether the term “crypto currency” will be redefined as “crypto asset.” *This article was written by Fisco