Japan’s financial watchdog is expected to tell a Hong Kong-based cryptocurrency exchange to stop operating in the country without a license, according to source familiar with the situation.

Hong Kong-based Binance, the world’s largest digital currency exchanges, faces the warning from Japan’s Financial Services Agency (FSA).

In a report from Bloomberg, the cryptocurrency exchange, founded by Zhao Changpeng, has several staff members in Japan; however, an unnamed source said that the exchange had been expanding without receiving permission to do so.

News of this saw market prices react with bitcoin dropping down to $8,768, during afternoon trading on Thursday, according to CoinMarketCap. Ethereum has suffered as well falling to $544, whereas ripple is down by 6.51 percent at $0.661580, at the time of publishing. According to a January report from Bloomberg, Binance said that it was working to gain a license in Japan.

Speaking today on the warning, Changpeng said that Binance was ‘engaged in constructive dialogue’ with Japan’s financial watchdog and has ‘not received any mandates’ from the regulator.

In wake of the hack at cryptocurrency exchange Coincheck in January – which saw the theft of $530 million worth of NEM making it the biggest of its kind – Japan’s regulator has taken a firmer hand to the market. As a result, it has conducted onsite inspections at all of the country’s 32 digital currency exchanges to determine whether they have the correct procedures in place.

To date, it has issued licenses to 16 exchanges. Notably, though, it gave another 16 permission to continue operating without a license while their applications were being processed, one of which was Coincheck. Since the hack, the FSA has ordered two exchanges to cease operating for a month – Bitstation and FSHO – due to improper management procedures in place, while ordering a further five to present a ‘security improvement plan’ by the 22nd March.

Japan, one of the most active digital currency markets, introduced a licensing system for cryptocurrency exchanges last year. However, since the hack at Coincheck some have questioned whether the country has moved too fast to embrace the industry. This is compared to China who have taken a firmer stance by banning trading at domestic digital currency exchanges in September.

As the world’s biggest cryptocurrency exchange it remains to be seen what lasting impact, if any, this will have on market prices. Right now the industry is going through a turbulent phase as calls to regulate the sector continue to be voiced.

Featured image from Shutterstock.

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