Japan’s financial regulator to impose stricter rules on cryptocurrency exchanges
Japan’s, Financial services agency [FSA] has published results of its on-site inspections of 23 cryptocurrency exchanges. According to the agency, there are hundreds of companies waiting to be reviewed by them. These inspections were conducted in the wake of the Coincheck’s hack where the company lost over $550 million in a security breach. The agency has decided to execute more stringent regulations for new applications from exchanges seeking for an operating license.
Newly registered cryptocurrency exchanges will have on-site inspections at a very early stage and the agency will also have a close look at their business models. The FSA said that an ongoing review of registration procedures is necessary and it will continue to prioritize investor protection. “We will enrich document and evidence confirmation about the situation of the company’s business plan and the effective internal control system and the situation of the governance system that gives priority to user protection, performing the verification on-site and through hearings,” read the document. The FSA also added that Coincheck will be “verified separately”.
The document recognized a range of problems across all the cryptocurrency exchanges. Some of them include business models, risk management and compliance, internal audits, and corporate governance. The FSA also blamed certain exchanges for the lack of anti-money laundering measures. It also advised voluntary regulatory organizations to set up an effective internal control system.
The FSA investigation concluded that the internal control systems of exchanges failed to keep track of their growing transaction volumes. The inspection found that the domestic companies showcased a six-fold increase in the value of their total digital assets. The value of total digital assets of the exchanges rose to $7.1 billion in a year.
Japan’s cryptocurrency organizations are being increasingly hit with new regulations which seem to be getting more rigid with every hack and scam. Japan Virtual Currency Exchange Association [JVCEA], a self-regulatory body was developed in early March in collaboration with the FSA to develop policies. Last month they dictated their members to determine maximum limits on their trade volumes.
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