Japanese Regulator Issues Warning Letters to 5 Unregistered Crypto Exchanges

Users of 5 Exchanges May Lack Asset Protection

The Financial Services Agency (FSA), Japan’s financial regulator, announced Nov. 29 that it has issued warning letters to five cryptocurrency exchanges it accuses of operating without registration. The five crypto exchanges are Bitcastle LLC, Bitget Limited, Bybit Fintech Limited, Kucoin and MEXC Global.

According to a Coinpost report, crypto exchanges targeting Japanese residents must register with either the FSA or a financial bureau. The regulator said it cannot supervise unregistered crypto exchange platforms and therefore cannot verify whether they are properly segregating customer assets.

The FSA said this lack of oversight could leave authorities unable to help aggrieved users in case of disputes or unforeseen circumstances. The regulator also warned that Japanese residents using these unregistered exchanges may not be eligible for asset protection or compensation under Japanese law.

By issuing the warning letters, Japanese regulators join their French and Hong Kong counterparts who have also targeted unlicensed crypto exchange platforms. France’s regulator went further, urging residents to take precautions when dealing with one such platform. In Hong Kong, the Securities and Futures Commission threatened legal action against entities operating illegally in the region.

The FSA’s warning comes as Japan seeks to establish itself as a leader in the Web3 space. For instance, Yuichiro Tamaki, leader of the Democratic Party for the People, advocated for tax and regulatory reforms for crypto assets in media reports. As recently reported by Bitcoin.com News, Tamaki’s party proposed a separate 20% tax on crypto assets.

As of this writing, none of the five exchanges had issued a statement regarding the FSA’s warning letters.