For the first time ever, the Financial Services Agency of Japan has rejected the application of a cryptocurrency exchange seeking to legally operate within the country.
While most countries are still struggling to come to terms with cryptocurrency and blockchain technology, Japan already has policies and internal structures in place to oversee these burgeoning new technologies. Chief amongst these is the Financial Services Agency (FSA), who is tasked with overseeing the country’s cryptocurrency exchanges.
Application Denied
The FSA just rejected the application from the Yokohama-based FSHO virtual currency exchange. The rejection was due to the agency’s belief that the exchange lacked the necessary systems to properly operate.
This isn’t the first time FSHO has run afoul of the Financial Services Agency. The exchange was the recipient of a previous business suspension order. The FSA issued the order due to the fact that FSHO did not do enough to verify customers’ identities in cryptocurrency transactions that had suspected criminal connections.
The end result for FSHO is that when the suspension period ends tomorrow, the cryptocurrency exchange will be barred from operating due to their application for registration being rejected by the FSA.
Sending a message. https://t.co/i6rr76lq8h
— Nikkei Asia (@NikkeiAsia) June 6, 2018
Japan Taking Security Seriously
Through the auspices of the Financial Services Agency, Japan is taking security of cryptocurrency exchanges quite seriously. The hack of Coincheck back in January had major repercussions. The loss of roughly $530 million in NEM tokens shook the faith of many crypto enthusiasts in the country.
The exchange reimbursed those who lost funds, but the FSA instituted some major crackdowns afterward. Coincheck and other exchanges were visited by the FSA and had their systems thoroughly checked over.
Last month, the FSA introduced five new rules for cryptocurrency exchanges. These rules include:
- Higher standards of system management and not storing currency in internet-connected computers.
- Check customer balances several times a day and verify customer IDs for large transactions in order to weed out money laundering.
- Banning coins that are privacy-focused and guaranteeing a great deal of anonymity.
- Exchange officers are not allowed to use client funds or cryptocurrencies.
- Stricter internal regulations, such as separating employees from asset management roles.
The FSA’s rejection of the application from FSHO is bad news for the cryptocurrency exchange. However, it does show Japan’s commitment to ensuring a safe and well-regulated environment for crypto investors.
What do you think about the FSA rejecting the exchange’s application? Let us know in the comments below.
Images courtesy of Shutterstock and Twitter/@NAR.