Last Friday, Japan’s Financial regulator sprinkled six anti-money-laundering business improvement orders over some of the country’s biggest cryptocurrency exchanges — all of which it had carefully and prominently licensed only nine months ago.

Whatever your ideology on bitcoin, bureaucracy and the crypto market, it was an odd way for Nobuchika Mori to spend what is widely assumed to be one of his final weeks as head of the Financial Services Agency. Odder still because of what — crypto aside — he has done to the place.

Mr Mori, who will be Japan’s longest-serving FSA minister if he lingers much beyond July, has the distinction of being a Japanese regulator that foreign investors have not only heard of but have formed a view on. He has played the strongman lieutenant of the Abenomics project, has curated the first three years of the corporate governance code and (whether to the good or not) has given the FSA a recognisable voice in the market narrative of the past three years. As such, his expected departure from the job this summer and the selection of his successor (most probably from two internal FSA candidates) is not shaping up as a market-neutral event — especially if anyone decides to equate it with a let-up in pressure on companies to improve governance and shareholder returns.

Any judgment on Mr Mori’s legacy, though, is complicated by those wayward crypto exchanges, the FSA’s unapologetic haste to lead the world in crypto regulation, and the many issues Japan burdened itself with when, last April, it became the first major country to recognise bitcoin as a currency. On Mr Mori’s watch, normally conservative Japan was quite uncharacteristically progressive in its encouragement of crypto exchanges, issuing operating licences to 11 of them last September. While other countries perceived a bubble (or other dangers) and clamped down, Japan and the FSA appeared to welcome the crypto furore.

Mr Mori has not, on the face of it, been rewarded for that punt. It all feels a bit chaotic. Last week’s business improvement orders join a fairly long stream of other measures to patch up a regulatory regime that doesn’t quite look ready for the task in hand. Japan’s enthusiasm for crypto regulation arose from its international humiliation from the 2014 debacle at MTGox— a Tokyo-based bitcoin exchange that was once the world’s busiest but collapsed after a massive digital heist. But this stuff is teething, and still accident prone. Just a few months after issuing the first exchange licences in September 2017, Coincheck, a Japan based exchange that had advertised extensively to the general public, suffered a $530m heist. The FSA buzzed around rejecting new applications from some and ordering business suspensions on others, but it was hard not to conclude that Mr Mori’s dash to play the pioneer had cost the general public dearly.

There are two reads on Mr Mori’s strategy on crypto, and what it says more broadly about his tenure at the FSA. The first is that this mixed a well-intentioned gambit of catch-up with a poorly thought through piece of aggrandisement. Mr Mori knew, intimately, that Japan’s financial sector had fallen behind in IT, fintech, blockchain and its general embrace of the digital. Faced with an exciting, emerging genre that had already captured the imagination of the Japanese public, it must have been tempting to overlay on to crypto a load of pre-existing national ambitions centred on tech start-ups, fintech and encouraging more retail cash to flow around the system. The added pleasure — of being the FSA regulator who put Japan ahead of the global curve on something — must also have been considerable. If that reads Mr Mori correctly, this has not so far been a resounding success and he has left whoever follows him a job that is unlikely to get easier — particularly if crypto prices crater.

But another read is that this was pretty smart. Mr Mori saw in the emergence of crypto a sort of regulatory gymnasium where the FSA could safely bulk up without pulling any of the muscles required for maintaining general financial system stability. The FSA was probably taken by surprise at how instantly its legitimising of bitcoin helped fuel the buying frenzy. Fundamentally, though it probably doesn’t mind too much if the wild price fluctuations underscore the caveat emptor message, because crypto is, for now, something of a walled-garden in relation to the broader financial system the FSA oversees — far better regulating around the aftermath of a bitcoin crash than a stock market collapse. Mr Mori and the FSA went into this — along with the rest of the world — knowing how much they didn’t know about how to regulate crypto and how an instinctively conservative agency should go about protecting the public in the digital era. This was war gaming in a safe environment.

There is, as yet, no reason to believe that all the right lessons were learned, but it wasn’t a terrible idea.

leo.lewis@ft.com

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