5 exchanges in Japan have shut down after increased scrutiny by the Financial Securities Agency (FSA). According to Nikkei, 2 exchanges, Mr. Exchange and Tokyo Gateway are withdrawing license applications made after increased enforcement by the financial regulators post the $532 million Coincheck hack.
They follow the exchanges Bitstation, Raimu and BitExpress who have all withdrawn their applications for license with the FSA. This comes after exchanges in Japan were required to register with the agency by September as per the recently amended Payment Services Law.
The FSA licensing regulations had required existing exchanges to demonstrate high security standards in a series of checks at these exchanges premises. The FSA had conducted on site inspections of the unlicensed exchanges who had submitted their applications. They were unsatisfied with the corporate governance system as well as internal controls.
There were other issues brought into the light.
On March 8th, 2 exchanges including Bit Station were ordered to suspend services for a 30 day period. It was alleged that someone within Bit Station had used crypto deposits for his own use. Business improvement orders were issued to 5 exchanges – Mr. Exchange and Tokyo Gateway among them.
Some exchanges felt that they were not in a state to comply with the new regulations.
Mr. Exchange in a blog post had said:
“While this is a regrettable result, at present we have determined that it is difficult to be in a state of readiness to be able to respond to changes in the virtual currency landscape, so we decided to withdraw the application for a virtual currency exchange business.”
The steps taken by the FSA highlight the need for strong regulatory oversight over the cryptocurrency exchanges. By adhering to strong security and compliance standards, licensed exchanges such as Quoine will be able to win back the confidence of the Japanese who have now faced 2 of the largest breaches in the crypto space – Mt. Gox and now Coincheck.
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