Coinbase is positive about its prospects in the Japanese market despite the strict regulatory oversight of the government and the financial watchdog. The exchange is confident of securing the approvals required to conduct operations in the near future.
In June, Coinbase announced that it has officially launched its Japanese office under the leadership of Nao Kitazawa, a former Morgan Stanley investment banker. Currently, the exchange is in the process of procuring a license from the Financial Services Agency (FSA).
Mike Lempres, chief policy officer at Coinbase, said the process is “going well,” as reported by Nikkei Asian Review on Wednesday. He added that the company is “committed to getting it done” and that the license should arrive next year. Lempres was formerly the chief legal officer for the exchange and has since moved on to deal with government policy at Coinbase.
Placing investors’ safety at the top of its priority list, Coinbase plans on working with the FSA to make sure the guidelines are met. Lempres said that offline storage accounts for 99% of the funds and only 1% is contained in “hit wallets,” which are fully insured.
Reiterating his stance on working with the government, he said, “the Japanese government is more focused on security”, adding that this relationship “is good for us.”
A point of contention highlighted by Lempres is the regulatory requirement of Coinbase’s systems. It is yet unclear whether Coinbase would have to duplicate its U.S. systems in Japan for regulatory compliance. If done, it would increase the FSA’s ability to track transactions. However, it would lead to security concerns for the exchange.
“We won’t do anything to even raise the possibility of a hack. It would be hard for us to duplicate what we do in the U.S. today in Japan and other countries,” Lempres added.
The FSA’s stance on cryptocurrency exchanges has been very rigid. The regulator has not approved the registration of exchanges since December 2017, with over 160 companies waiting for approval. Prior to this, the regulator permitted exchanges to carry out operations while awaiting approval.
Japan is no doubt a huge market for a major player like Coinbase, despite the regulatory complications it is facing. “Japan has been an active large market from the very beginning and has proved resilient as it bounces back from several bad experiences. We think there is great demand for a trusted provider of services here,” Lempres stated.
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