Japan has given formal approval for its cryptocurrency industry to regulate itself, Wednesday. This picture taken shows James MacWhyte, a member of a bitcoin trading club posing with a bitcoin medal at the club's meeting in Tokyo, Feb. 27, 2014 YOSHIKAZU TSUNO/AFP/Getty Images

Financial Services Agency (FSA), Japan's financial regulator, has given approval for the country's cryptocurrency industry to regulate itself. A formal announcement on this was made on the Japan Virtual Currency Exchange Dealers Association (JVCEA) website Wednesday. The FSA approval gives the association rights to set rules to safeguard investor assets, prevent money laundering, and give operational guidelines.

The JVCEA in its announcement said it had received a certification as an "accredited funds settlements corporation" from the FSA, explaining that its self-regulatory powers would come into effect from Wednesday. The JVCEA originally applied for self-regulatory status in the third quarter of 2018.

"We have received certification from the Financial Services Agency as a settlement company association... In addition, we will report that we have enforced self-regulation rules on the same date and officially launched all work including self-regulatory work at the following offices," the announcement read.

Under the approval, the JVCEA will also have the power to punish operators that do not adhere to the safety regulations that the Japanese lawmakers have put in place. “We will make further efforts to build an industry that is trusted by customers,” the JVCEA said following the FSA approval.

“It’s a very fast-moving industry. It’s better for experts to make rules in a timely manner than bureaucrats do,” Reuters reported an unnamed official from the FSA as saying.

Yuri Suzuki, a senior partner of Atsumi and Sakai — an independent Tokyo law firm — told the agency that regulations applied by the JVCEA were stricter compared to the current regulations. Suzuki hoped that the approval will help regain the public’s trust in virtual currency.

"The self-regulatory body’s workload is likely to be heavy and there is an issue of whether it can secure enough staff with expertise in crypto exchange business,” Suzuki told Reuters.

Japan became the first country to regulate cryptocurrency trading platforms in 2017. According to the regulations, exchanges must register with the FSA, but following a series of hacking attacks on the crypto exchanges, the agency has not approved a single virtual currency license since December 2017.

The high-profile hacks prompted the FSA to put in place rules that would safeguard investors' funds and sanction defaulting exchange platforms. In September, the FSA published guidelines for new applicants willing to establish virtual currency exchanges in the country. In the announcement, it was noted that 16 companies have been allowed to operate cryptocurrency exchanges while their applications were being reviewed.

Coincheck, a Japanese digital currency exchange, was hacked in January and the hackers stole about 523 million NEM tokens. Another Japan-based exchange, Zaif, also lost up to $60 million worth of cryptocurrencies in September.

The FSA also conducted investigations — following Coincheck's hack — on many other exchanges which revealed sloppy management, lack of proper safeguards, and lack of basic anti-money laundering measures. Toshihide Endo, the FSA commissioner, said that they were working to maintain a balance between safeguarding investors and promoting technological innovation. The agency issued Coincheck with a business improvement order after the attack.