Japan’s FSA Reject a Cryptocurrency Exchange Application for the First Time
Japanese Financial Service Agency (FSA), the financial regulator of Japan, is reportedly to reject a crypto exchange application. It has been record as the first time the Japanese financial regulator rejects a crypto exchange application after approving 16 cryptocurrency exchanges.
The rejected exchange FSHO has already been suspended twice from carrying out any crypto activities and received two business improvement orders.
The Japanese news portal Nikkei reported that, “The first time it has done so. The decision follows the ministry’s conclusion that Yokohama-based FSHO lacks the necessary systems to operate its business. By barring an exchange operator that it has found to be substandard, the agency aims to demonstrate its determination to re-establish a sound currency trading environment in Japan.”
The FSHO is a deemed dealer or quasi-operator of cryptocurrencies in Japan which means the exchange has been allowed to operate while its application was being scrutinized by the FSA. There are 16 crypto quasi-operators at present. Nevertheless, 8 of them claimed that they will withdraw their applications. There are also 16 fully-licensed cryptocurrecny exchanges in Japan.
In January 2018, Coinckeck was hacked and lost $523 million USD in NEM tokens and has led to a regulatory re-examination of Japan’s crypto industry. Besides Coincheck, FSHO is the only crypto exchange in Japan that has received two punishment on the 8th of March and 6th April. FSHO was required to correct four areas of operations such as to “build a position to securely manage user information”.
The FSA found that “the exchange did not sufficiently verify the identity of customers in transactions where crime is suspected, or in cases where customer deposits may be diverted,” Nikkei also reported that the suspension period ended on Thursday, after that, the agency will bar the exchange from operating and deny its registration.
This can be seen as an effort made by the Japanese financial authority to strength the regulations for exchanges in order to restore investors’ confidence and develop healthy markets.