The country known as the most influential proponent of virtual currencies is pulling the plug on some of them – particularly those which operate in a highly anonymous manner and offer rich privacy features.
Japan Imposes Ban on Private Cryptocurrencies
At a time when private cryptocoins are becoming more and more popular, Japan’s Financial Security Agency (FSA) has announced that there will be an outright ban on all cryptocurrencies that provide a sufficient degree of anonymity, according to CoinDesk. The ban will come into effect on June 18, 2018, and will impact trading of a few major cryptocurrencies that offer privacy-rich features. They include Monero (XMR), Dash (DASH), Augur's reputation token (REP), and ZCash (ZEC). All cryptocurrency exchanges operating in Japan are under the purview of the Japanese FSA. Many Japanese cryptocurrency exchanges are now known to be pulling down the curtains on transactions of private cryptocoins.
The primary reason for the unwelcome update from Japan is being attributed to the regulator’s goal of deterring illicit activities in the cryptocurrency marketplace. Such features will have a decisive impact on the commercial ecosystem of a market. The regulator's decision comes after a hacking attempt on the Japanese cryptocurrency exchange CoinCheck which led to the theft of 523 million NEM (XEM) cryptocoins, estimated to be worth around $400 million. Due to the coins' privacy features, it was difficult for the authorities to track the hackers who siphoned off the cryptocoins.
Impact on the Cryptocurrency World
While regulators have their own reasons for imposing the ban, cryptocurrency enthusiasts believe that privacy is being made the scapegoat amid the unfortunate developments. Along with the standard features of self-regulation, immutability, fungibility, and decentralization, cryptocurrencies have gained enormous traction owing to privacy and anonymity. Loss of anonymity, or pseudonymity in certain cases, will lead to many existing cryptocurrencies losing their appeal impacting their wider adoption. Many new initial coin offerings (ICO) will now find it difficult to find a suitable marketplace, as exchanges may shy away from listing them for fear of a ban. (For more, see The Five Most Private Cryptocurrencies.)
Japan has been among the first nations to embrace cryptocurrencies into its regulatory ecosystem, and legalized virtual currencies in 2017. It imposed the necessary capital controls and security mandates paving the way for multiple crypto exchanges to seek a license and operate under the supervision of FSA. In fact, the Japanese yen (JPY) holds the top rank among fiat currencies used for dealing in bitcoins with a 60 percent market share. Any decision by Japan is expected to be followed by regulators and exchanges across the globe, and privacy-proponents of cryptocurrencies should brace for more such bottlenecks going forward. (See also, Top Fiat Currencies Used to Trade Bitcoin.)
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