The Japanese financial regulator has finished the on-site inspections of 23 cryptocurrency exchanges. The agency found many problems and has released a report outlining them. The regulator will use the findings to tighten its review procedures of new crypto exchange applicants, including over 100 companies that have been waiting to be reviewed.
Results of On-Site Inspections of 23 Exchanges
Japan’s top financial regulator, the Financial Services Agency (FSA), announced Friday the results of the on-site inspections of 23 cryptocurrency exchanges operating in the country.
Seven out of the 23 are fully licensed crypto exchanges; the rest are “deemed dealers,” which are exchanges that have been allowed to operate while their applications are being reviewed by the agency. The FSA started inspecting these exchanges after the hack of Coincheck in January.
The inspection reveals a sloppy reality that the maintenance of the internal control system has not kept up with the rapid expansion of transactions. The risk was not evaluated for each virtual currency…and it was judged that securing necessary personnel for countermeasures such as money laundering was insufficient at multiple vendors.
Furthermore, the agency found that “the total assets of the exchanges rapidly expanded to more than 6 times in one year,” the news outlet conveyed. The FSA is also concerned that there are fewer than 20 executives and employees at most places, with assets under custody of “3.3 billion yen [~US$30 million] per person” on average.
The FSA will make full use of the findings from the inspections when reviewing new applicants. Since the hack of Coincheck, the agency has not approved any crypto exchanges.
According to Nikkei, three companies are currently being reviewed, including Coincheck. The publication reiterated:
It is expected that exchange registration that had virtually stopped after the Coincheck incident will be resumed. In the future the examination will be tightened, such as evaluating the effectiveness of the business plan…and the internal control system on-site.
At present, there are over 100 companies waiting to be registered. According to Business Insider Japan, they include megabanks, major IT companies, and major securities companies. While some have already submitted applications to the FSA, several have only gone through one consultation with the agency. An FSA official told the publication that he would like those wanting to be registered to examine the inspection report and “first compare [the findings] with the situation of their company.”
What do you think of the FSA’s inspections and findings? Let us know in the comments section below.
Images courtesy of Shutterstock.
Need to calculate your bitcoin holdings? Check our tools section.
Purchase Bitcoin without visiting a cryptocurrency exchange. Buy BTC and BCH here.