Tomoko Amaya, the Vice Minister for International Affairs, Financial Services Agency, Japan shared her views in an interview article titled “The crypto-asset world is sobering up” on April 26. The interview article mainly focused on stablecoins and crypto assets-related queries.
According to reports, Tomoko Amaya answered questions related to crypto winter and lessons learned by the recent dislocation of certain crypto asset providers and stablecoins. For those who are not aware, “crypto winter” is the term used to describe a protracted bear market in the cryptocurrency sector, which is typified by a sharp decline in cryptocurrency prices and a decline in market capitalization.
In his interview article, the Vice Minister clarified that there’s no such thing as crypto winter currently, contrary to this crypto asset providers, investors, and other related stakeholders are waking up from their sleep. The recent market turmoil which consists of the collapse of FTX, Celsius, and Terra has unveiled the vulnerability of the situation. Additionally, the collapses show how unstable and risky the self-proclaimed “stablecoins”, liquidity, and maturity mismatches are. The problem is excessive leverage, misuse of customers, and conflict of interest making this sector more risky to cope with.
The structural vulnerabilities related to stablecoins are similar to those that already exist in traditional financial activities and some crypto assets activities are not unlike “Ponzi schemes”. Additionally, the Vice Minister added that while various regulatory and supervisory measures address these structural shortcomings in the traditional financial sector and for the crypto-asset sector few jurisdictions have taken measures.
According to Tomoko Amaya, there’s a lot of confusion in the crypto-asset sector but its impact on the financial system and real economy has been very less. Also, he warned that if the rate of the interconnectedness of the crypto-asset sector remains high in the future this could cause serious problems for the traditional financial system.
On the question of whether Japanese crypto-asset frameworks are good enough to prevent vulnerable sectors and formulation of new policies, the Vice Minister for International Affairs, Financial Services Agency shared some interesting news related to asset management. According to Amaya, financial stability, user protection, and anti-money laundering/ countering the financing of terrorism (AML/CFT), are three key policy pillars that financial regulators must take into account when assessing the dangers posed by the quickly developing crypto-asset markets. User protection, knowing your customers’ norms, and anti-money laundering (AML) are some steps that can help regulators to keep an eye on fraudsters and keep their customers safe from any mishaps.