A working group under the Financial System Council has compiled a draft proposal on regulations for virtual currencies that are traded on the Internet, informed sources said Wednesday.
It calls for the mandatory registration of operators of virtual currency exchanges with the Financial Services Agency, the sources said. This is aimed at protecting users of the currencies.
The working group was to hold discussions on Thursday before drawing up a final report containing its proposals.
Based on that report, the FSA will then aim to prepare a legal framework for regulating virtual currencies and exchange operators during next year’s Diet ordinary session, which is scheduled to start on Jan. 4.
There have been calls for greater protections for the users of virtual currencies since the bankruptcy last year of Mt. Gox, an exchange for bitcoin in Tokyo. The president of the exchange operator was arrested and indicted for embezzling customer assets.
The draft proposes conditions that virtual currency exchange operators should meet, such as maintaining a certain amount of capital and requiring them to manage customer assets separately from their corporate assets.
In addition, it calls for mandatory checks on exchange operators by certified public accountants or auditing firms. These would inspect how the operators are handling their assets and verify their financial statements.
Meanwhile, to counter money laundering, the draft says exchange operators should be obliged to confirm the identities of clients when they open accounts and report questionable trading to authorities. These requirements would be in line with requests from the Financial Action Task Force, a Paris-based international body combating the financing of terrorism.