Japan's Financial Services Agency (FSA) has issued draft guidelines for funds investing in crypto.

The Sept. 30 announcement, which mentions crypto assets in the introduction but only alludes to them in the text of the proposed amendment itself, is the latest move by the authorities in the country to prudently manage the development of the market without shutting it down.

"It is anticipated that financial products that invest in crypto assets (virtual currency) will be formed in the future," the agency notes in the introduction to the proposed revisions to Supervision Guidelines. "But there are also indications that investment in crypto assets is encouraging speculation. The agency believes that it should carefully handle the formation and sale of investment trusts that invest in such assets."

The actual revisions are a bit more vague. They advise funds to exercise caution when investing in assets outside the original objective of the trust and to evaluate potential risks, such as those relating to volatility and liquidity. It refers to the worrying investments as "non-specific assets."

"Special attention should be paid to the composition of such products," the amendment cautions.

"In the revised bill, virtual currency is not mentioned," notes the Zaikei newspaper, though it reported on the revisions as dealing with crypto assets by referencing the introduction.

Public comments are being taken by the FSA on the revisions through the end of October.

The issuing of the draft comes in the context of movement on the regulatory front in Japan. The country was rocked by the collapse of Mt Gox in 2014 and the 2018 hack of the Coincheck exchange and has been working to reestablish the crypto market on a better footing. Since early 2018, the FSA has been fine-tuning the regulatory framework for exchanges and establishing a framework for crypto offerings, and in early 2019 amendments were proposed to Payment Services Act and the Financial Instruments and Exchange Act.

Progress is already evident. In the first half of 2019, the FSA approved three new exchanges after approving none in 2018. Last week, a self-regulatory organization (SRO) formed that will help guide the development of the market for security token offerings (STO), suggesting that the private sector is preparing for the new regulatory environment.

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