According to latest reports, the Diet in Japan (the legislature that is composed of the Lower and the Upper Houses) has approved a bill on Wednesday to regulate operators of virtual currency exchanges in the country, in order to help ensure better protection of users.

Japan Times reported that the House of Councilors, the upper house of the National Diet of Japan, approved the bill to revise the fund settlement law. The amendment passed the House of Representatives (lower house of the Diet) last month.

Under the revised law, operators of domestic cryptocurrency exchanges are required to register with the Financial Services Agency (FSA). In addition, the agency is authorized to carry out on-site inspections and issue administrative orders as needed. By requiring registration of cryptocurrency exchanges and designating the FSA as their regulator, the government hopes to prevent money laundering and ensure protection of the cryptocurrency users.

Japanese government brought the issue of regulating virtual currencies and their operators into consideration following the collapse of MtGox bitcoin exchange that was based in Tokyo. In March, the Cabinet approved the bill on virtual currencies that treat them as “asset-like values that can be used in making payments and be transferred digitally”.

The new regulations have been well received by the operators, who believe that it will improve trust in the industry and virtual currencies. They operators said that when the legal status of the virtual currencies is established, more firms will enter the market and boost the use of digital currencies, such as bitcoin.

Yuzo Kano, chief administrative officer at the Japan Blockchain Association (JBA), told CoinDesk:

"The JBA welcomes this new law and would like the thank the efforts of the lawmakers, FSA and related government agencies, and all other involved parties who helped see this bill through."

The revised law will go into effect within a year of its promulgation.