Starting | Japan blockchain supervision policy and practice analysis

In the blockchain-related regulatory policies of East Asian countries, Japan is a relatively open and cautious country. On the one hand, there has been a “gatehead ditch” incident in Japan, and the painful experience has caused investors to suffer heavy losses, making the country like a “cup shadow” in a few years. On the other hand, in recent years, Japan has actively passed legislation at the national level, boldly considering Bitcoin as a legal means of payment, and mainstream virtual currency assumes the function of some currencies. This is unbelievable in the conservative East Asia region. Compared with East Asian countries, Japan's regulation in the blockchain + financial sector is relatively open (for a comparative analysis of blockchain regulatory policies in East Asian countries, see Deng Jianpeng, Sun Penglei: "Intermediary Chain Management and Compliance Response", Mechanical Industry Press, 2019 edition). However, compared with blockchain entrepreneurs such as the United States and China, Japan’s entrepreneurial projects are relatively limited; its frenzied enthusiasm has never been able to compete with neighboring South Korea.

However, Japan’s economy is huge, and the development of the blockchain and financial sectors is extremely strong. Therefore, on the one hand, its regulatory policy trend may have a positive impact on global policies, which deserves the attention of Chinese regulatory authorities; on the other hand, the huge market is a good foundation for virtual currency transactions, thus attracting several domestic trading institutions giants to expand into Japan. Based on the above two aspects, a detailed analysis of Japan's policies and practices is extremely valuable!

I. Background of regulatory policy

Japan is a frontier country in the development of the blockchain industry in the world. It officially recognizes Bitcoin as a legal means of payment through legislation. Japan was also the first country to establish a regulatory mechanism for blockchain and bitcoin, and it has become a model for many countries. The People's Bank of China issued a risk warning on Bitcoin in 2013. In the first half of 2017, it entered some well-known virtual currency trading institutions to investigate, but the relevant regulatory rules have not yet been introduced. As a financially developed country, Japan's regulatory rules have implications for China's future regulation and legislation. This chapter examines the details of Japanese law and explores its possibilities for China.

Once the world's largest bitcoin trading company – Japan's Mt.Gox in September, a huge bitcoin was stolen, the exchange said that nearly 850,000 bitcoins were stolen, of which 750,000 were owned by customers, hacked The market value of the stolen Bitcoin was as high as $480 million at the time, and investor losses were extremely heavy. This incident caused Japanese regulators to tighten supervision of virtual currency and blockchain, resulting in Japan's development in blockchain technology lags behind other developed countries. Although the Japanese regulator, the Financial Services Agency (FSA), has been discussing how to manage virtual currency, until the beginning of 2016, the Japanese government re-emphasized the development of blockchain and hoped to keep up with the global rhythm.

At the same time, in response to the impact of environmental changes in information and communication technology development on financial-related laws, on May 25, 2016, the Japanese Senate Plenary Meeting passed the revised Payment Services Act (which is also referred to as the amendment by the Chinese media). Funding algorithm"). Japan’s regulation of virtual currency is mainly regulated by the Payment Services Act, which was implemented on April 1, 2017. Article 63 of the Act adds a chapter on “virtual currency”, which officially recognizes virtual currency as a legal means of payment and incorporates it into the legal system, becoming a country that provides legal guarantees for virtual currency exchanges. A new chapter introduces a registration system to supervise platforms for trading digital assets such as Bitcoin. In addition to the Payment Services Act, the Japanese government, in conjunction with its implementation, announced the “Funding Algorithm Implementation Order” (2010 Decree No. 19, implemented on April 1, 2017) and “Virtual Currency” on March 24, 2017. The Cabinet of the Exchange Operators Order (the Cabinet Order No. 7 of 2017, implemented on April 1, 2017) has very detailed regulations on fund transfer, fund clearing, certification practitioner associations, and dispute resolution. 【1】

In addition, as the administrative authority of the financial industry, the Japan Financial Services Agency also issued a number of guidance or explanations in a timely manner to guide the application of relevant laws, such as the "Transaction Guide, Volume 3: Financial Companies Related 16 Virtual Currency Exchangers Related", "Public Review Summary and The corresponding views of the Financial Services Department, etc. It should be noted that due to the diversity and complexity of virtual currency applications, other laws are also applicable according to different occasions, such as the Financial Instruments Trading Act, the Banking Law, the Criminal Income Transfer Prevention Act, and the Consumer Contract Law. Wait. 【2】

In the first few years of the development of digital currencies such as Bitcoin, Japanese users used Bitcoin for consumption, which required an 8% consumption tax. The Japanese legislature has repeatedly discussed the cancellation of the Bitcoin consumption tax until March 31, 2017, the Consumer Law Enforcement Order (1988 Decree No. 360) was amended, and Article 48, paragraph 2, provides for the transfer of virtual currency. It is not the taxable object of consumption tax. On July 1, 2017, the revised Consumer Law Enforcement Order came into effect, officially canceling the 8% bitcoin consumption tax, and Japan surpassed China to become the world's largest digital currency market.

Although digital currency can be used as a payment method in Japan as a legal currency and is exempted from consumption tax, this does not mean that the profits from digital currency investment are not subject to tax. On December 1, 2017, the National Tax Agency of Japan issued the "Methods for Calculating the Income of Virtual Money, etc.", stating that the proceeds from the sale or use of virtual currency represented by Bitcoin are, in principle, classified as miscellaneous income and require income tax. declare. [3] According to Bloomberg News, after the capital gains for Bitcoin transactions in 2017 were a kind of “miscellaneous income”, the IRS said that digital currency investors are now required to submit from February 16 to March 15, 2018. When you file your tax return for the year, you declare your own profit. The tax rate is 15% to 55%. [4]

Second, detailed regulatory policies

The Japanese government allows virtual currency transactions, but the regulatory system behind it is very strict. The Japanese government has strengthened supervision of virtual currency in order to prevent virtual currency from being used as funds for terrorist organizations, to protect traders' rights and to prevent illegal use of virtual currency for money laundering. Like the legislation of the United States and other countries, Japan’s regulation of virtual currency is dominated by virtual currency trading institutions. The so-called "virtual currency exchange practitioners" in the supervision bill, that is, the virtual currency trading platform familiar to the Chinese people, such as the fire currency network, and so on.

According to Japan's newly revised regulatory rules, virtual currency can act as a settlement means, and trading institutions engaged in the exchange of virtual currency and cash must register with the Japanese Finance Agency. As the supervisory department, the Financial Department has the right to enter the trading institution to inspect and issue orders to the trading institution to rectify the business or stop the transaction. The following is a brief introduction to Japan's specific regulatory regime for virtual currency trading platforms.

(1) Requirements for mandatory registration

The revised “Valid Money” chapter of the Payment Services Act was implemented in April 2017. On the day of implementation of the law, institutions that have engaged in virtual currency transactions are required to register within six months of the implementation date. The Payment Services Act will also apply before the trading institution officially registers for the application. Regulations mandate the registration of virtual currency trading institutions, which is the basis for facilitating unified supervision. Article 63, paragraph 2, of the Payment Services Act stipulates that no business related to the “virtual currency exchange industry” may be carried out without the registration of the Prime Minister of the Cabinet. Otherwise, according to Articles 2 and 5 of the Payment Services Act, the party that engages in the “virtual currency exchange industry” without registration or who is registered by improper means “will be sentenced to three years or less. There is a term of imprisonment, or a fine of 3 million yen or less, or both."

When the trading institution registers, it needs to submit various documents including the income and expenditure forecast for the next three years. The application materials mainly include the business name and residence, the amount of capital, the name and location of the business place where the virtual currency transaction business is conducted, the directors and supervisors, the name of the representative of the foreign virtual currency trading institution in Japan, the name of the virtual currency operated, and the virtual currency transaction. The content and methods of the business, the commissioning of the virtual currency trading business to third parties, and so on. In addition, on the basis of submitting application materials by the trading institution, the government will conduct hearings and field research on its preparation status.

The Prime Minister of the Cabinet will refuse to apply for registration if the applicant has any of the following provisions or if the important documents in the documents submitted by the applicant are falsely recorded or the important facts are missing. These include: not a company limited by shares or a foreign virtual currency trading institution (only foreign companies with a place of business in Japan), no representative in Japan, and so on. When the Prime Minister of the Cabinet refuses to register according to the provisions of the preceding paragraph, he shall promptly announce the reasons and notify the applicant of the result.

The Payment Services Act imposes mandatory registration requirements on foreign practitioners. A virtual currency trading institution that has obtained registration and business licenses in countries other than Japan operates in Japan and must be re-registered in Japan in accordance with the law. Even if the foreign country has already entered the same type of registration as the “virtual currency exchange practitioner” under the law equivalent to the Payment Services Act, such as the administrative regulations of the State of New York, these foreign virtual currency trading institutions do not In accordance with Article 63, paragraph 2 of the Payment Services Act, registration as a “virtual currency exchange practitioner” prohibits all residents living in Japan from engaging in any form of persuasion related to the virtual currency exchange industry. The "registration of the same type as the virtual currency exchange practitioner" mentioned here refers to the information on the "Report of the Working Group on the Work of the Settlement of the Settlement Business" (the fourth round) of the Japan Financial Review Committee. The outline of the regulatory system is based on administrative regulations such as the New York State of the United States and the relevant laws established by the relevant laws of Germany, France, and Switzerland.

Any change in any of the provisions of paragraph 1 of Article 63(3) of the virtual currency trading institution shall be reported to the Prime Minister of the Cabinet in a timely manner. After receiving the declaration, the Prime Minister of the Cabinet shall register the declaration in the register of the virtual currency trading institution.

In August 2017, the Japanese Finance Agency revealed that about 50 bitcoin exchanges had submitted registration documents to the agency and set up a team to supervise digital currency. In September 2017, the Japan Financial Services Agency (FSA) released the first list of licensed “virtual currency exchanges” in Japan. The first batch of licensed virtual currency exchanges in Japan included 11 exchanges including Bitflyer, Zaif, BTCBOX, GMO, QUOINEX, BitBank, and Bitpoint. [5] According to our research, by September 2018, more than 100 trading institutions have submitted registration applications.

(2) Several core businesses under supervision

According to Article 2, paragraph 7, of the Payment Services Act, the “virtual currency exchange industry” as the object of registration includes any one or more of the following services: 1 trading of virtual currency and exchange with other virtual currencies; 2 engaged in 1 Media, distribution and agency of the prescribed behavior; 3 Management of the trader's money and virtual currency based on the actions specified in 1 and 2.

Among them, "the trading of virtual currency and the exchange with other virtual currencies" refers to the initiative to become a trader (customer), engaged in virtual currency trading and exchange business. For example, a virtual currency sales location and a virtual currency exchange, etc., customers can purchase bitcoin or exchange bitcoin with other virtual currencies. In addition, the delivery of virtual currency (equivalent to the legal currency remittance business), as long as the virtual currency trading mechanism is accompanied, is also in the category of "virtual currency exchange."

As for "media, distribution and agency", it refers to accepting customer orders and acting as a proxy for virtual currency trading institutions. "Media" refers to the act of matching a sales commission of a customer with a purchase commission of another customer at a virtual currency trading institution. "Distribution" and "agent" refer to the act of accepting a customer's commission to buy or sell.

"Managing the trader's money and virtual currency based on the behaviors specified in 1 and 2" means, for example, in a virtual currency trading institution, a virtual currency held by a customer who conducts a transaction, and a purchase or sale virtual The money used in currency is managed and kept. The necessary condition for this business conduct is to manage the "exchange of virtual currency", so an online wallet (an online account for the purpose of keeping virtual money) is simply a virtual currency, or a business for transferring money between traders does not belong. This article provides.

In addition to the provisions of the above-mentioned "Payment Services Act", according to Japan's "Protection of Crimes of Proceeds from Crime", Article 2, Item 2, No. 31, virtual currency transactions should also implement anti-money laundering regulations. As a “special business practitioner” as defined in the Law on the Prevention of the Proceeds of Crime Proceedings, the trading institution has the following obligations: 1 The obligation to confirm when opening an account and at the time of the transaction (Article 4 of the Law on the Prevention of Crime Income Transfer); 2 Confirmation Obligation to make and maintain records and transaction records (same bills 6 and 7); 3 reporting obligations for suspicious transactions (same bill 8); 4 improvement of internal management system (education of employees, selection of managers) , production, monitoring, etc. of the risk assessment report) (same bill 11).

(3) Qualification and financial regulation of "professional" transactions

With the gradual popularization of virtual currency, the current virtual currency transactions can be divided into two types, one is the private and sporadic transactions between the holders; the other is that the relevant institutions use virtual currency transactions as occupations as a profitable behavior. Japanese law regulates virtual currency transactions only for the latter. According to the “Policy of Business”, professional trading refers to the act of “publicity” (for the public) and the “repetitive and continuous” trading and exchange of virtual currency. Regarding “publicity” and “repetitive continuity”, it includes not only the fact that the behavior of “publicity” is repeated in reality, but also the situation of “publicity” and “repetitive continuity”. .

Therefore, if only the virtual currency trading and exchange for the purpose of settlement and investment, and the trading and exchange of virtual currency such as the general investor's personal interests are not the legal “virtual currency exchange industry”.

Virtual currency trading institutions actually have quasi-financial or financial attributes, and setting a certain threshold on property requirements is also necessary to maintain the healthy development of the industry. Japanese law requires trading institutions to have "basic property as required by the Cabinet Order." According to Article 9 of the Cabinet Office, the trading institution 1 holds at least 10 million yen in capital, and the net assets cannot be negative. According to Article 3, Item 63 of Article 63 of the Payment Services Act, in order to ensure the correctness of the financial statements, practitioners are obliged to accept external supervision of such financial statements and accounting firms.

(4) Code of Conduct for Virtual Currency Exchanges

Based on the bankruptcy case of Mt.Gox, once the world's largest bitcoin trading institution, and the risks associated with the purchase of virtual currency, the regulatory system is designed to protect traders. Article 63, Sections 7-12 of the Payment Services Act sets the following behavioral norms for trading institutions: 1 prohibits nominal lending (for example, Company A has a virtual currency trading institution qualification, which allows Company B to engage in virtual currency trading business in the name of Company A. , such behavior is prohibited); 2 security management of information; 3 guidance to the entrusted party; 4 measures on the protection of traders (descriptions to prevent misidentification, obligations to provide information); 5 trader's property Management obligations; 6 contractual obligations with the designated virtual currency exchange business dispute resolution agency.

The sixth item involves a dispute resolution mechanism for new things, which deserves attention. The law requires that for various disputes, the trading institution shall take corresponding measures according to the following provisions: First, in the case of the existence of a virtual currency trading business dispute resolution agency, the virtual currency trading business with the designated virtual currency trading business dispute resolution agency The conclusion of the procedure to implement the basic contract; Second, when the designated virtual currency transaction dispute resolution agency does not exist, the virtual currency transaction business related complaint handling and dispute resolution measures are taken. When a virtual currency trading institution signs a procedure to implement a basic contract in accordance with the provisions of the preceding paragraph, it shall not publish the trade name or name of the designated virtual currency transaction dispute resolution agency.

All of the above regulatory systems are aimed at protecting traders. Among them, those that have a direct impact on traders are 4 measures on trader protection (instructions to prevent misidentification, obligations to provide information), and management obligations of 5 traders' property. As a measure to protect the rights of traders, virtual currency trading institutions have an obligation to explain and provide information to traders.

(5) Exchange information and risk warning obligations

According to Article 63, paragraph 10 of the Payment Services Act, when virtual currency and legal currency transactions are conducted, the information provided by the virtual currency trading institution to the trader is correct and plays a vital role in the trader's trading judgment. As a measure to protect the rights of traders, virtual currency trading institutions have an obligation to explain and provide information to traders.

As for the content explained to the trader and the specific content of the information that must be provided, according to the provisions of Articles 16 and 17 of the Cabinet Office, it must be clearly stated in writing or other appropriate form from the beginning. According to Articles 16 (2) and 17 (1) of the Cabinet Office, the information to be explained includes: 1 that the virtual currency of the transaction is not domestic currency or foreign currency; 2 the virtual currency of the transaction cannot be guaranteed by a specific party. Under the circumstances, or can be guaranteed by a specific party, the name, trade name and name of the party and the contents of its guarantee; 3 can prevent the misunderstanding of the virtual currency of other transactions with the national currency or foreign currency; 4 Summary of the virtual currency of the transaction; 5 If there is a risk of direct loss due to the change in the value of the virtual currency being traded, the risk and the reason are explained; 6 In addition to the above, if there is a transaction judgment that may affect the trader, and thus directly When the risk of loss is caused, the risks and reasons are explained. According to the provisions of Article 17(1), No. 6 of the Cabinet Office, what should be explained includes, for example, the value of property recorded by electronic means on electronic devices and other articles due to the characteristics of virtual currency. The organization can transfer through electronic information processing, or the risk of virtual currency disappearing or reducing value due to cyber hacking.

In addition, the "Procedures" II-2-2-1-2 (1) also clearly indicate the way and method of explanation. Different forms of explanation should be considered for different forms of transactions. For example, in the case of trading through the Internet, the trader reads the instructions given on the computer screen, clicks the button on the screen based on the understanding of the content, and in the case of face-to-face transactions, according to the written delivery and oral Explain, and based on this, the method of recording. The "Procedures" II-2-2-1-2 (2) examples detail the required description. If a virtual currency trading institution provides leveraged trading for its business, then the trader is at risk of suffering a high loss of leverage ratio. Therefore, the trader should also properly explain the risk of leveraged trading.

(6) Distinction between exchanges and traders' property

Article 63, paragraph 11 (1) of the Payment Services Act requires that a virtual currency trading institution must distinguish between the trader's money or virtual currency and its own money or virtual currency. As for the specific method of distinguishing management, according to the Cabinet Order 20, Item 2, Item 1, the virtual currency trading institution is required to clearly distinguish the virtual currency from the virtual currency of the trader, and the different traders must also Differentiate management. The specific management method is a virtual currency that can clearly distinguish the virtual currency of the trader from the inherent assets of the trader, and can immediately and clearly distinguish the virtual currency owned by different traders, including the ability to immediately discriminate the trader's virtual currency amount in his own book. status.

In the case of Bitcoin, the requirement is that the bitcoin of the virtual currency trading institution and the bitcoin of the trader are managed in different accounts, and the number of bitcoins owned by the trader can be grasped in the book. However, the regulations do not require that each trader create a different bitcoin account for separate management. Regarding the protection of trader property (bankruptcy isolation), Japan is still under discussion.

Considering that the bankruptcy incident mentioned above has occurred in the domestic exchanges in Japan, according to Article 23 of Article 23 of the Payment Services Act and Article 23 of the Cabinet Office, the basis for the division and management of trader assets is In addition, the trading institution also has the obligation to accept external supervision of the management of asset division by CPAs and accounting firms. The virtual currency trading institution receives at least one external inspection each year. Article 108 of the Payment Services Act stipulates that the person in charge of the trading institution shall be punished for 2 years in violation of the managerial obligation of the trader’s money and virtual currency as stipulated in Item 1 of Article 63 of the Payment Services Act. The following imprisonment, or a fine of less than 3 million yen, or two combined punishment.

Related to this, the law proposes to supervise and manage the books of the trading institutions. Articles 13 to 20 of the Payment Services Act, the production and preservation of books and materials and reports by the virtual currency trading institution, the submission of relevant reports after the CPA and the accounting firm's monitoring report, random on-site inspections, and business improvement orders And so on. These contents include: 1 the obligation to produce and preserve books and materials (Article 13 of the Payment Services Act, 13); 2 the obligation to submit the report (the same as Article 63 of the Act); 3 random on-site inspections (six paragraphs of Article 63 of the same Act) ; 4 business improvement orders (the same as Article 63, paragraph 16); 5 cancellation of registration (the same as Article 63, paragraph 17); 6 registration of the cancellation (the same as Article 63, paragraph 18); 7 supervision of the prosecution (same bill 63 Article 19); 8 abolished notice, etc. (the same as Article 63, paragraph 20).

The isolation of the trading client from the trading institution's own funds is an important way to prevent the emergence of trading institutions in Japan. However, in our research, we found that according to the current laws of Japan and the practice of the industry, the trading client and the trading institution's own funds are only separated in the internal accounts of the institution, and are not the assets of the third party (such as a bank) to entice the trading customers. Regulators have yet to explore the feasibility and technical standards of virtual currency third-party hosting. This means that the trading institution still has the opportunity to use the client's funds for private use.

Third, the ICO's supervision and policy direction

As far as the status quo of legislation is concerned, Japan has not yet issued specific regulatory rules for ICO, but issued corresponding warnings and penalties. On October 27, 2017, the Japan Financial Services Agency issued “About ICO – Reminding Investors and Practitioners” to define ICO and remind investors and practitioners. The article reminds practitioners that, depending on the ICO structure, it will become the object of regulation of the capitalization algorithm or financial commodity trading law: the specific token issued in 1ICO belongs to the “finance algorithm” (the “payment service law” mentioned above). The virtual currency in the same below, the business with the transaction as the business needs to register with the Prime Minister of the Cabinet (the financial bureaus); those who have not registered to engage in relevant business are subject to punishment. 2 In the case of ICO's investment nature, even if it is paid in virtual currency, it will be regarded as purchasing in legal tender, which will be considered as the regulation target of financial commodity trading law. The article also reminds investors that the purchase of tokens through ICO has the following high risks: First, the possibility of falling prices: tokens may fall sharply and suddenly lose value. Second, the possibility of fraud: In general, white papers will be produced in the ICO. However, the items disclosed in the white paper may not be implemented, or the agreed goods or services cannot be provided. When investors purchase tokens, they need to pay full attention to the suspicious persuasion of ICO. On the basis of fully understanding the above risks and understanding the content of the project, they should conduct transactions at their own expense. [6]

In February 2018, the Japan Financial Services Agency warned against the ICO operations and sales activities of the Blockchain Laboratory, which was established in Macau and not registered as a virtual currency exchange provider in Japan, in accordance with the "Finance Algorithm". On September 7, 2018, the official website of the Japan Financial Services Agency issued the first ICO-related penalty notice, “Administrative Punishment for Special Cases for Qualified Investors,” which was the first official punishment imposed by IFC-related practitioners by the Japan Financial Services Agency. The company involved was Dragoon Capital Co. Ltd. The official company and individuals explained the fraudulent investment behavior. In this incident, because the company involved did not complete the registration in the Financial Department, it did not meet the investment business norms in the Japanese Gold Business Law. At the same time, this is the first notice of punishment for individuals issued by the Financial Services Department. [7]

Fourth, outlook and thinking

At present, virtual currency uses blockchain as the underlying technology, and its rapid development has become a trend and a new trend that is difficult to stop. In this blockchain and virtual currency “river and lake”, whether it is technology research and development or project financing, the United States, Western Europe and East Asia, China, Japan and South Korea have become the most important markets. Among the three East Asian countries, Japan has become a pioneer in virtual currency legislation. Especially after the above-mentioned new law came into effect, the Japanese virtual currency ushered in a major positive, and even helped to boost the value of the bitcoin. Since the beginning of 2017, more than 200,000 Japanese merchants have begun to receive bitcoin as a means of payment. We conducted field research in Tokyo and saw a well-known Japanese electronics store such as BIC CAMERA posting notices in the store and accepting bitcoin payment, with a single limit of 100,000 yen. By scanning the code, the completion of bitcoin payment is simple and easy. Of course, the above propaganda is more than the essence, and the popularity and promotion of Japanese bitcoin payment will take longer.

In the relevant Japanese regulatory policies, the following core elements of the aforementioned Act: compulsory trading institution registration; trader rights protection; information and data security management; trading institutions and trader funds (including cash and virtual currency) and anti-money laundering mechanisms, There is a lot of value for China. The researcher believes that "virtual currency trading platform, as a place for public trading of virtual currency, belongs to the operation of financial business, and should be effectively regulated by law, set the corresponding thresholds and business rules. Japan from the perspective of public law The legislation of the currency trading platform has been relatively complete, which is conducive to the healthy and orderly development of the virtual currency trading market. Its legislative experience and China's practice have certain complementarities and are worth learning." [8]

In January 2018, the Japanese virtual currency exchange Coincheck was hacked to steal $500 million in assets. [9] After that, the Japanese Financial Services Agency (FSA)'s approval of virtual currency exchanges became more stringent, resulting in hundreds of exchanges waiting for license applications in recent years. In September of the same year, the Japanese exchange suffered another hacking attack, and the virtual currency exchange Zaif lost 60 million US dollars. [10] From the past experience, it is clear that Japanese exchanges need to enhance cybersecurity to protect consumer rights, which is the focus of Japanese legislation.

In recent years, for the virtual currency industry, Chinese regulators have made great efforts, including the Chinese central bank to promptly provide risk warnings to the public, and to station and investigate some well-known trading institutions in early 2017 to investigate potential risks and investigate possible violations. Wait until the last stop of all ICO and virtual currency exchanges. However, in order to achieve the healthy development of blockchain and virtual currency and control the risks involved, China still lacks a long-term regulatory mechanism. Therefore, promoting relevant Chinese legislation is the next important step for regulators. We believe that pursuing safety first in the financial sector is a matter of course, but if it evolves into financial security in practice, it may create obstacles to blockchain technology innovation, including financial technology.

We believe that in the future China's relevant legislation, we should first force the “eligible” trading platform to register with the regulatory authorities, and when the time is ripe, we will dock all the transaction data to the regulatory agencies to facilitate supervision and effectively protect the rights and interests of traders. At present, a large number of virtual currency trading institutions are set up overseas, and they are all outside the "eyes" of Chinese regulators. Some trading institutions continue to provide customers with leveraged services of “financing and financing” even without regard to the warnings of regulators; some institutions have illegally introduced so-called “bitcoin ETF funds” to Chinese citizens without the approval of any financial regulators. Some OTC services have not provided any user identification and anti-money laundering mechanism, that is, providing trading services for Chinese customers, which violates the Chinese foreign exchange regulatory bottom line; some trading institutions provide futures trading for customers, and company registration and The servers are located outside the country.

In combination with Japan's latest legislative practice, China's future regulatory rules, in addition to mandatory registration, should also focus on the network and information security technology standards of trading institutions, third-party depository of trader funds (cash and virtual currency), and conscientious implementation of anti-money laundering mechanisms. , risk disclosure and trader rights protection, etc., while promoting the healthy development of virtual currency and blockchain industry, effectively control risks and prevent various illegal and criminal behaviors.

Reference: [1] See "Japan: The world's first digital currency and ICO landing supervision program full investigation", available at http://www.mpaypass.com.cn/news/201803/09105516.html, visit time: 2018 10 Month 6th. [2] See "Comprehensive Analysis of Japanese Virtual Currency Law", http://www.sohu.com/a/226353245_481520, visit time: October 6, 2018. [3] See "Japan Virtual Currency Law Panoramic Scan", https://baijiahao.baidu.com/s?id=1595092495546387561&wfr=spider&for=pc, visit time: October 6, 2018. [4] See “Japan Cryptographic Investors Face Up to 55% Capital Gains Tax”, https://www.cnbeta.com/articles/tech/697805.htm, visit time: October 6, 2018. [5] See Sohu.com “Japan Blockchain Industry Research: Why does the government strongly support blockchain and digital currency? 》, https://www.sohu.com/a/203606454_498906, visit time: October 6, 2018. [6] See "Japan Virtual Currency Law Panoramic Scanning Virtual Currency Risk", http://www.gowintech.cn/a/2018/0318/32242.html, visit time: October 6, 2018. [7] See the exclusive chain: "The Japanese Finance Agency issued the first ICO illegal fundraising punishment order", https://baijiahao.baidu.com/s?id=1611179083354793953&wfr=spider&for=pc, visit time: October 2018 6th. [8] Yang Dong, Chen Zheli: "Virtual Currency Legislation: Japanese Experience and Implications for China", in the "Securities Market Herald", 2nd issue, 2018. [9] See https://www.fxshell.com/article/28446, visit time: October 8, 2018. [10] See http://www.yocajr.com/news/21890, visit time: October 8, 2018.

Author: Deng Jianpeng