Japan’s FSA (Financial Services Agency) is drafting legislation to stop domestic cryptocurrency from being circulated abroad in the event of bankruptcy.
According to local media Nikkei report, if an international cryptocurrency exchange files for bankruptcy, the Financial Services Agency is drafting legislation to stop domestic assets from being transferred abroad.
A translated version of the report highlights that since there have been numerous instances of illicit cryptocurrency leaks, the goal for this legislation is to appropriately safeguard the assets of individual investors.
Japan To Make Changes To The “Fund Settlement Act”
The new legislation will come as an addition to the pre-existing law of the nation and comes at a time when more and more Japanese nationals are investing in crypto.
The Fund Settlement Act, which also governs cryptocurrency exchanges, will be developing a new “holding order” that would prohibit cryptocurrency exchanges from accepting domestic assets that foreign clients have entrusted to them.
The law comes in the context of Japanese nationals who use foreign exchange services like FTX and lose all of their money in the event of bankruptcy.
Up until now, only companies registered as financial instruments exchanges under the Financial Instruments and Exchange Act have been able to use holding orders.
Japan’s New Law to Protect Local Crypto Comes Amid The Nations Crypto Growth
Japan’s decision to protect local crypto comes in the backdrop of the nation accelerating its crypto adoption. For the past five years, Japan has seen a rise in crypto userbase and firms.
Previously, Japan initiated a review of its cryptocurrency laws, which could lead to lower taxes on digital assets and possibly the introduction of domestic funds that invest in tokens.
According to Bloomberg, the FSA will evaluate in the upcoming months whether the current strategy of regulating cryptocurrency under the Payments Act is sufficient or not.
Will Japan See A Further Rise In Crypto Userbase?
Japan’s large crypto userbase is a direct result of the nations tech-savvy ecosystem and the eagerness of the crowd to explore unconventional financial assets.
With this in mind, it is anticipated that the Japanese cryptocurrency market will generate US$1,376.0 million in revenue by 2024.Despite this, the revenue for 2025 is expected to see a slight deceleration of 4.51% reaching a total of US$1,314.0 million.
The reason for this, however is nothing negative but a small saturation that markets usually go though once in a while. Further, it is anticipated that there will be 19.43 million users in Japan’s cryptocurrency market by 2025.
During the same time, the user penetration rate is anticipated to have risen to 15.93% from 15.76% in 2024. With big businesses and retailers taking digital currencies as payment, Japan’s progressive regulatory framework has made it a hub for cryptocurrency innovation and adoption.