Japan’s regulatory Financial Services Agency (FSA) will now likely start processing applications of potential new cryptocurrency exchanges again – should candidates meet all of its new requirements. Among candidates is American cryptocurrency exchange giant and wallet provider Coinbase.
However, per multiple Japanese media sources, the FSA has now confirmed that it has introduced stringent new application procedures that may deter many potential applicants.
Media reports state that a new questionnaire has been released, featuring 400 questions (the previous application form featured less than 100). Applicant companies must also send the minutes of their board meetings to the FSA, who will use these to gauge exchanges’ financial health and security networks – and check that executive-level employees are approving all key decisions.
The FSA has come up with its new application system after conducting a series of on-site inspections at the 16 licensed exchanges, where it said it uncovered evidence of poor management, lax security, slipshod minute-taking and inadequate financial management – leading to the agency issuing a series of business improvement orders earlier this year.
Per a law put into place last year, all new exchanges must apply with the FSA for operating permits. In June, Coinbase announced that they are launching an office in Japan, “as part of our effort to accelerate the global adoption of cryptocurrency.” The company intends to apply for a license with the FSA “within the year.”
Over 100 companies have lodged applications to the FSA since it began regulating exchanges in September 2017. Although 11 exchanges were initially granted operating permission (with the number soon after rising to 16), the Coincheck hack of January 2018 has led the FSA to introduce new, more stringent checks on existing exchanges while all new applications have been put on hold.
Also, this summer, the FSA hit some of the top exchanges in the country – including BitFlyer – with business improvement orders. If the exchanges fail to make significant improvements to their management systems, they could face suspension or yet stricter measures.
For example, the FSA has told all six of BitFlyer, QUOINE, Bitbank, BTC Box, Bit Point Japan and Tech Bureau to do the following:
- Establish a system for dealing with money laundering and terrorism financing-related matters.
- Shore up customer protection.
- Create a risk management network for dealing with new tokens.
At the same time, local exchanges are trying to win back trust by self-imposing a limit on so-called margin trading, as reported. Also, two Japanese cryptocurrency exchange platforms, BITPoint and GMO Internet, have made significant moves to reignite public thirst for Bitcoin and altcoin trading – using A-list celebrity endorsements for the first time since the Coincheck hack.