Crypto Exchange Body In Japan To Prohibit Insider Trading And Privacy-Centric Cryptocurrencies

News, Regulation | June 19, 2018 By:

Japan’s Virtual Currency Exchange Association (JVCEA) has drafted new self-regulatory rules in an effort to step up consumer protections and improve transparency.

The JVCEA is a self-regulatory body that was formed earlier this year following the Coincheck hack. The JVCEA is made up of 16 crypto exchanges that are currently registered with Japan’s Financial Services Agency (FSA). The chairman and president of the organization is Taizen Okuyama of Money Partners. Bitflyer CEO Yuzo Kano is the Vice Chairman, along with Bitbank President Noriyuki Hiroeno. The other two directors are SBI Virtual Currencies’ Yoshitaka Kitao and GMO Coin’s Tomitaka Ishimura.

The proposed self-regulatory rules will reportedly include a ban on insider trading, penalizing crypto exchange employees if they engage in “inappropriate” trading due to their firsthand knowledge. The JVCEA will also prohibit the trading of privacy-centric cryptocurrencies on exchanges, such as Monero and Zcash, in order to conform to anti-money laundering (AML) regulations.

Crypto exchanges will also be required to better protect customer assets in order to prevent a repeat of the Coincheck hack. They will have to report audit results to the association. Customers’ private keys, which are needed to complete transactions, must also be managed offline to minimize hacking risk.

The association will reportedly vote on the proposal at a meeting on June 27. It seeks to adopt the new rules as soon as it is recognized as a self-regulatory body by the FSA.

According to an unnamed official at one exchange, the JVCEA has drawn up nearly 100 pages of self-regulatory measures which could be costly for crypto exchanges to comply with. “We’re being subjected to rules almost as tough as the Financial Instruments and Exchange Act,” the official said.