Regulators Unhappy with Exchanges
On 8 March 2018, the Financial Services Agencies (FSA), which oversees the securities and exchange operations in Japan, took charges on seven exchanges. The reasons were that these exchanges failed to follow strict rules on money laundering, bad users’ fund safety, and inadequate internal policies.
Five cryptocurrency exchanges – Tech Bureau, GMO Coin, Bicrements, Mr. Exchnage, Coincheck – are ordered to improve their business practices. Coincheck exchange had previously lost over 500 million USD of user funds in terms of NEM Cryptocurrency. And the FSA had already slapped such notice to Coincheck in January asking to improve their system.
The other two exchanges FSHO and BitStation had to suspend their operations for a month. FSA reported that FSHO didn’t have a proper implementation to monitor training, and the training provided to the employees was inadequate. Whereas Bit Station had an employee who diverted users’ crypto-funds for his personal use, and it indicates a severe flaw in the cybersecurity measures of the exchange.
FSA had conducted inspections on multiple exchanges amid the Coincheck heist.
Good days ahead for Cryptocurrencies
Industry leaders and enthusiasts have welcomed these steps from the FSA. Globally an estimated 30% of Cryptocurrency transaction happen in Japan. And no doubt that Japan wants to become Asia’s hub for Cryptocurrency.
And it is noteworthy that Japan had suffered two massive Cryptocurrency heists. The Coincheck heist is still fresh, though it assured users that the exchange would give compensation. On the other hand, Mt. Gox collapsed as a result of Bitcoin hack worth 480 million USD, and the users who lost funds were left in the dirt.
Japan has 16 licensed exchanges. Moreover, the FSA had allowed 16 other exchanges. These exchanges were in business before the regulation came in. And they continue their operations while their licensing applications are under review.
All the seven exchanges criticized by the FSA are yet to obtain their licenses.