While Financial Services Agency Commissioner Junichi Nakajima said he’s open-minded about the potential benefits that assets like Bitcoin possess as a quick and cheap way to send cash, in Japan currently, they are mainly being used for speculation and investment, not as a means of transferring money. New challenges are coming from a broader proliferation of firms involved in decentralized finance, known as DeFi, he said.

“We need to consider carefully whether it is necessary to make it easier for the general public to invest in crypto assets,” Nakajima, 58, who became chief of Japan’s financial regulator last month, said in an interview.

Unlike in the U.S., where investors now have a multitude of ways to invest in the burgeoning asset class, Japan remains heavily restricted by comparison. Japan’s FSA set up a study group of outside experts in July and is expected to consider regulatory responses to DeFi in the coming months, with investors looking to Nakajima for clues on the outlook.

Nakajima was involved in crafting Japan’s first regulatory framework on crypto assets, including the registration requirement for exchanges in 2017. The country has since tightened up, following a massive coin theft at Tokyo-based exchange Coincheck Inc. in 2018, which revealed lax internal control and customer protection.

Exchanges’ Struggles

While Nakajima said the current regulatory framework on crypto exchanges has been effective in customer protection and anti-money laundering, many of the 31 registered exchanges are struggling financially, he said. Their business situation “is rather tough,” he said.