The doors have closed on two more cryptocurrency exchanges in Japan following investigations by the country’s Financial Services Agency — raising questions as to whether or not most exchanges will be able to meet the regulatory authority’s standards.
Not Secure Enough
In the face of tightening regulatory oversight from the country’s authorities, two additional Japanese cryptocurrency exchanges are ceasing operations — bringing the total number of closed cryptocurrency exchanges to five. This follows the large-scale heist of digital assets from prominent Japanese exchange Coincheck.
As reported by Nikkei Asian Review, Japan’s Financial Services Agency (FSA) ordered both Tokyo GateWay and Fukuoka-based Mr. Exchange to make significant improvements to their data security on March 8th. Both exchanges were also ordered to improve various other safeguards which were found to be insufficient.
Instead of making the requested upgrades, both exchanges have withdrawn their applications to legally operate as exchanges and are set to return both their clients’ cash and digital currencies.
Setting a High Standard
Tokyo GateWay and Mr. Exchange have now joined the ranks of three other exchanges to cease operations following the relatively new law which forces Japanese cryptocurrency exchanges to register with the FSA. Raimu, bitExpress, and Bit Station have all previously withdrawn their applications. The Nikkei Asian Review reports that “more are expected to follow, as the FSA has given several exchanges a chance voluntarily close before ordering them to do so.”
Currently, 16 exchanges are registered with Japan’s FSA.
All five closed exchanges were members of a group of companies which applied for registration but had not yet received it — though they were still allowed to operate while their applications were pending. Coincheck, which was victim to a large-scale heist of roughly $532 million in NEM, also has an application pending.
Following the Coincheck debacle, the FSA conducted on-site inspections of each and every unregistered cryptocurrency exchange applying for acceptance. Officials conducted thorough investigations into each business’ data security, requiring them to meet the standards set by the 16 exchanges already registered.
According to Nikkei, the FSA’s investigations have so far found issues relating to corporate governance and internal controls, and that “some operators see little prospect of meeting the agency’s standards.”
What do you think of Japan’s regulatory oversight of cryptocurrency exchanges? Do you think it ultimately helps weed out the unsafe exchanges while promoting those that protect their customers the most? Let us know in the comments below!
Images courtesy of Bitcoinist archives, Nikkei, and The Japan Times.