Japan’s Cryptocurrency Business Association releases new guidance
The Japan Cryptocurrency Business Association (JCBA), an organization that fosters the responsible development of the crypto asset industry in Japan, has released new guidance on the regulation of crypto asset management.
The guidance is the result of a consultation process with crypto exchanges, custodians and other parties and takes their viewpoints into account.
The guidance seeks to encourage a crypto asset system that balances user protections with stable market development.
Crypto custody
The topic for the guidance was the newly added crypto asset management clause for crypto asset exchanges in amendments to Japan’s Payment Services Act announced on May 31 of this year.
In the amended Payment Services Act, crypto asset management is defined as “management of crypto assets on behalf of other parties.” However, the JCBA points out that “this definition does not clearly state what sort of business content falls under ‘crypto asset management’ for custodians who handle crypto asset deposits for users,” and the brief attempts to clarify the scope of regulations by exemplifying cases that do and do not fall under management.
Moreover, the brief includes a section that states “management of crypto assets on behalf of other parties” should be interpreted as a situation that satisfies the following three conditions: “(a) the crypto asset custodian subject to these regulations has the authority to transfer the assets to any destination based solely on their own judgement and not the will of the user, (b) return of the crypto assets subject to these regulations to the user has been assured, and (c) safekeeping of crypto assets subject to these regulations is for the user’s convenience.
Examples of cases that are considered “crypto asset management” include “cases that make it possible for a user to deposit crypto assets at an operator, with the operator sending a certain amount of assets from the user’s balance to another user without the original user’s signature or transferring assets equivalent to a user’s balance to an address designated by the user” and “cases that use 2-out-of-2 secret sharing in which one piece of a private key goes to the user and the operator retains the other, with the operator’s piece of the key aggregated to decrypt the entire key at the time of signing.”
Examples of what would not be considered “crypto asset management” include “a client-side wallet in which only the user can control their crypto assets” and “the Lightning Network (because an operator cannot control a user’s crypto assets based on their own judgement).”
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Source: Japan’s Cryptocurrency Business Association releases new guidance » Brave New Coin
