Japan crypto exchanges may scrap system for screening tokens

The JVCEA has held talks about letting local exchanges list cryptocurrencies without going through its screening process. PHOTO: REUTERS

TOKYO (BLOOMBERG) - The body that governs Japan's cryptocurrency exchanges is in talks to abolish strict rules for listing digital tokens after Prime Minister Fumio Kishida's administration expressed discontent with the existing system.

The Japan Virtual and Crypto assets Exchange Association (JVCEA), which oversees digital coin listings, has held discussions about letting local exchanges list cryptocurrencies without going through its screening process, according to people with knowledge of the matter.

In a shift from its current stance, the self-regulatory body will focus on policing the assets once they are listed instead of being involved in the listing process, the people said, asking not to be identified because the talks are private.

It is also looking at whether member exchanges should be forced to delist digital tokens should problems arise after they start trading, they said. An easing of the rules would mark a dramatic liberalisation for Japan's market for cryptocurrency trading and could be a potential boost for foreign newcomers like Coinbase Global, which have broader knowledge of tokens than local firms.

The US company offers more than 100 coins at home, compared with GMO Coin - one of Japan's largest crypto firms - which has 21 cryptocurrencies listed.

The new measures will not apply to initial coin offerings, the people said.

The JVCEA aims to make a final decision on whether to change the rules by the year end, they said.

In May, a government panel on which Mr Kishida sits criticised the listing process for coins, saying "the certified self-regulatory organisation tends to spend a long time pre-screening" crypto assets and that it would "ease the criteria while being mindful of the need to protect users".

A Financial Services Agency (FSA) official, who asked not to be identified due to the agency's policy, said the regulator is aware the JVCEA is discussing a response to the Kishida administration's call for a simpler screening process, but that it is not clear what recommendations it will come up with and whether the FSA will approve them.

A representative for JVCEA was not immediately available to comment.

A legal requirement for crypto exchanges to report any plans to list new tokens to the regulator will likely remain even if the screening process gets dropped, a person with knowledge of the matter said.

Earlier this year, the JVCEA introduced a greenlist of cryptocurrencies that member exchanges could list in one go. Before that, a token listing often had to go through a screening process that could take six months or longer, causing some companies to complain that it was hurting growth, the people said.

The current process for approving new listings applies to coins that are not on the JVCEA's greenlist, large or small, although the organisation has been working to shorten the time it spends on screenings, according to the people.

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