FSA, Japan’s Regulatory Authority, Suspends Trading In Two Crypto-Exchanges
Trading in two of Japan’s cryptocurrency exchanges, Bitstation and FSHO, has been halted by its Financial Service Agency (FSA). Moreover, the FSA has ordered both exchanges to suspend business operations for 1 month (until April 7th). Additionally, five other digital currency exchanges, which also includes Coincheck, have been told to address security and other performance-related issues. As the exchanges attempt to work on improving their services, they have been instructed to periodically update the FSA about their efforts.
Some of the noteworthy comments made by the the FSA after examining the business practices of Yokohama-based FSHO exchange were as follows:
“There were repeated cases of high-value cryptocurrency trades with no judgment made about the need for notification of a suspicious transaction.”
It appears that the country’s regulator has taken these actions after an extensive probe of Japan’s crypto-exchanges. Findings of the investigation indicate that the trading platforms were not in proper compliance of KYC (Know Your Customer) regulations. KYC requires that a business take appropriate measures to verify the identify of their clients and adhere to anti-money laundering guidelines.
Japan’s Regulatory Body Is Attempting To “Clean Up” The Country’s Crypto Industry
Other issues found, according to the FSA, were poorly trained staff members and even “misappropriated” funds. Furthermore, this nation-wide investigation of crypto-related businesses has largely been prompted by the hack of Japan’s Coincheck crypto-exchange. As most crypto watchers are aware, the hack led to over $530 million worth of digital currency being stolen. Clearly, this hack coupled with FSA’s crackdown on the nation’s cryptocurrency market will likely lead to several changes in how this emerging industry operates within the country’s borders.
For instance, it’s possible that the relatively smaller crypto-exchanges, along with other poorly managed crypto-related startups, could be forced to shut down their operations. That’s because having to comply with new regulations requires a fair amount of resources and qualified personnel that demand competitive wages. The Financial Times even predicts that smaller crypto companies could join or be acquired by larger organizations.
Businesses Have Struggled To Return To Normal Operations After Suspensions
Historically, financial firms have not been able to recover to full strength after their business operations were suspended. Therefore, this crackdown will hopefully set a good example, and be something other crypto-related companies can learn from. Notably, these suspensions have come at a time when regulators around the world have begun to increasingly clamp down on crypto-related activity. As Core Media reported, French stock market regulator, Autorité des marchés financiers (AMF), stated that Bitcoin derivatives are subject to the same regulations as traditional derivatives. Failure to comply with the applicable rules and guidelines could result in stiff penalties.
Given the heightened scrutiny over crypto-related activity and businesses, it’s possible that cryptocurrency exchanges and other related businesses will be forced to comply with more tightened regulations. This might actually be a good thing given the large number of scams that have been orchestrated, particularly under the guise of ICOs.