The Japan Financial Services Agency has become very sensitive on cryptocurrency exchanges to fix the lax oversight. The regulator noted that most exchanges could not cope with rapid market expansion. Most of the exchanges said the agency head did too little to prevent money laundering. One of the exchanges was also ordered against accepting new customers while six others were sent business improvement letters.
Bitflyer, which is the one of largest cryptocurrency exchange platform in the world, accepted to stop the creation of new customer accounts to focus on propping up its internal controls. The six exchanges comprising Bitflyer, Bitbank, BITpoint Japan, Quione, BTCbox and Tech bureau are all registered under the financial services agency. Five of the companies are based in Tokyo except for Tech bureau which is based in Osaka. Registering with FSA is a very rigorous process that involves a highly strict inspection. The agency raised concern that the registered platforms have since grown and are failing to put in measures that will safeguard against theft. “The measures should reflect the growing dynamics of the industry,” said FSA. 40% of the registered companies did not meet these standards which thus prompted the reprimand.
What led to the crackdown?
The Japanese Financial Services Agency began its crackdown after the $527 million theft from coin check. The theft raised nationwide concern among the cryptocurrency community on the security of their investments while trading cryptocurrencies. The agency has also been turning down applications from investors planning to build exchanges; some companies were also ordered to halt their operations. The Japanese government has also been mediating for the adoption of new binding rules for the cryptocurrency market. The new policies are expected to be laid out by 2019, and the country will take the lead especially during this year while chairing the G20 summit.
The FSA also claims that some exchanges do not keep lists of people involved in money laundering and most of these exchanges also allow suspicious transactions to slip through their hands. Some experts also cite the lack of awareness in investor roles among exchange platforms primarily results in carelessness and insufficient accountability.