Weekly Business Insights from Top Ten Business Magazines | Week 296 | Shaping | 3

Extractive summaries of and key takeaways from the articles curated from TOP TEN BUSINESS MAGAZINES to promote informed business decision-making | Week 296 | May 12 – 18, 2023.

What Japan Could Teach The U.S.—And The World—About Regulating Crypto

By Nina Bambysheva | Forbes Magazine | May 8, 2023

Listen to the Extractive Summary of the Article

More than a million investors around the world were left stranded when FTX suddenly collapsed in November with an astonishing hole, estimated at $8.7 billion, in its balance sheet. The cryptocurrency exchange and its 130-plus affiliates have been operating in bankruptcy for five months, and a new management team claims to have recovered $7.3 billion of the missing cash and tokens. Yet only one component of the company has returned money to clients.

FTX’s Japanese unit allowed all verified accounts to resume withdrawals on February 21. As of April 25, nearly 10,000 individual and corporate clients had withdrawn crypto and cash worth approximately 23.4 billion yen ($175.4 million), according to the company.  Count this as a victory for Japan’s financial regulators and the strict rules they’ve put in place to protect consumers in the wild and wooly world of crypto.

Japan cracked down with safety and soundness rules from a unified regulator after two big exchange hacks. But now, from that stable (and some in the industry would say overly restrictive) base, it’s seeking to come up with a strategy to become a leader in the collection of mostly decentralized, blockchain-based technologies known as web 3. The U.S., by contrast, has arguably been open to more innovation, but its dueling oversight agencies and lack of rules have created gaps in oversight and a culture of regulation by enforcement that makes strategic planning perilous.

The FSA’s rules include:

1. Customer and company assets must be held separately, with holdings verified in annual audits. 
2. Investors can’t borrow more than twice their investments for leveraged trades on exchanges. (Many cryptocurrency exchanges, including Binance, allow trading at 100x leverage.) 
3. Exchanges must hold at least 95% of customer funds in cold wallets, which are not connected to the internet. 

Japan has thus become a customer-friendly crypto haven but at the expense of stringent supervision of the freewheeling digital assets industry.  Now, Japan is building on that secure base, with a national economic strategy and a bid to lead its allies in creating rules that will effectively govern the industry.

Placing well the country to suggest on tax reform, improved accounting standards, and regulation of blockchain-based finance. This also enables the country to give recommendations for the government to drive the conversation about digital assets at the next Group of Seven (G7) summit, scheduled to be held in Hiroshima later this month.

2 key takeaways from the aricle

1. In light of cryptocurrency exchange and its 130-plus affiliates who have been operating in bankruptcy for five months, FTX’s Japanese unit allowed all verified accounts to resume withdrawals of their crypto and cash on February 21. Count this as a victory for Japan’s financial regulators and the strict rules they’ve put in place to protect consumers in the wild and wooly world of crypto.
2. The FSA’s rules include: ustomer and company assets must be held separately, with holdings verified in annual audits. Investors can’t borrow more than twice their investments for leveraged trades on exchanges. (Many cryptocurrency exchanges, including Binance, allow trading at 100x leverage.) Exchanges must hold at least 95% of customer funds in cold wallets, which are not connected to the internet.  Japan seeking to come up with a strategy to become a leader in the collection of mostly decentralized, blockchain-based technologies known as web 3.

Full Article

(Copyright)

Topics:  Technology, Finance, Cryptocurrency