The Japanese financial regulator has revised its rules and procedures for registering cryptocurrency exchanges following the hack of Coincheck and the inspections that revealed many inadequate security measures of multiple exchanges. The regulator says its aim is to rebuild the crypto industry.
Strengthening Exchange Review Process
The Japanese Financial Services Agency (FSA) has reportedly strengthened its rules and procedures for approving the registrations of cryptocurrency exchanges, local media reported.
According to the Sankei Shimbun, the FSA “will strengthen the registration review” process for companies that have applied for registration but have not been approved. These companies, known as “quasi-operators” of cryptocurrencies, have been allowed to operate while their registrations are under review.
For registrars that pass the initial examination process, the agency will “proceed with [their] on-site inspections,” the news outlet detailed, adding that:
As a result of the inspection, it is a policy [of the FSA] to strongly seek ‘withdrawal’ from exchange companies that do not show improvement.
The process will help avoid a repeat of Coincheck’s situation since the hacked exchange applied for a license in September of last year but was allowed to keep operating as a quasi-operator. Coincheck has recently been acquired by Monex Group.
Rebuilding Crypto Industry
The FSA strengthened its rules after inspecting all quasi-operators and uncovered many inadequate security measures across multiple exchanges. Consequently, five companies have already withdrawn their applications and some exchanges were ordered to suspend operations. According to Jiji Press, the agency additionally revealed on Friday that another exchange, Campfire, is also “showing a willingness to withdraw its registration application.”
Some exchanges that have obtained licenses from the agency have also been inspected, including Quoine, Tech Bureau, and GMO Coin, the news outlet added. Tech Bureau and GMO Coin have already received business improvement orders from the agency. “We mainly examine the system of protecting users, the auditing function, which we do not know by reporting alone, whether they are exercising corporate governance by properly separating management and execution,” the FSA detailed.
Furthermore, over 100 companies are reportedly planning to enter the cryptocurrency exchange business, the Sankei Shimbun noted. Among them is Line Corporation which operates one of the world’s most popular chat apps, Line.
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Images courtesy of Shutterstock and the FSA.
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