The Japanese financial regulator has punished seven cryptocurrency exchanges in the country, suspending the operation of two of them. “The agency fears another Coincheck-style hack,” it stated after recent inspections of all crypto exchanges in Japan revealed inadequate measures for customer protection.
FSA Punishes Seven Exchanges
The Japanese Financial Services Agency (FSA) announced on Thursday that it had “punished seven cryptocurrency exchanges, ordering two of them to suspend business, in an effort to shore up consumer protection,” Reuters reported.
Bit Station and FSHO were ordered to suspend business from March 8 to April 7. The two are quasi-operators, meaning they are allowed to operate crypto exchanges while their registrations with the FSA are pending review. The agency has also asked the two exchanges to submit work improvement plans by March 22, the Mainichi reported.
In addition, Tech Bureau, GMO Coin, Lemuria Bitcoin Exchange (Bitcrements), Mister Exchange, and Coincheck also received improvement orders from the FSA, the news outlet detailed. The former two are fully licensed exchanges while the latter three are quasi-operators.
Since the revised payment services act went into effect in April of last year, cryptocurrency exchanges are required to register with the FSA. Sixteen crypto exchange operators have been licensed so far. In addition, sixteen more are permitted to operate crypto exchanges as quasi-operators. Moreover, there are reportedly over 100 companies seeking to enter the space and operate their own crypto exchanges.
The “FSA said a senior employee at Bit Station was found to have used customers’ bitcoin for the person’s own purposes,” Reuters detailed, adding that the exchange has ”dropped its application to become an authorized exchange.”
Issues Found During the Inspections
After Coincheck was hacked in January, the FSA started inspecting all crypto exchanges in the country. “The inspections target several of the country’s 16 licensed exchange operators and all 16 operators not yet officially registered with authorities,” Nikkei commented, adding:
While not yet complete, the FSA inspections have apparently found enough issues with customer protections and anti-money-laundering measures that the agency fears another Coincheck-style hack.
According to the news outlet, the FSA found the five aforementioned unregistered crypto exchange operators to be “particularly problematic,” adding that they will have to either “meet the agency’s requirements and complete registration or withdraw their applications.”
FSA Says Coincheck Has Enough Funds
When Coincheck was hacked in January, 58 billion yen (~USD$550 million) worth of the cryptocurrency NEM was stolen and the greater cryptocurrency market took a significant tumble.
Following the incident, the FSA issued the exchange a business improvement order and demanded that “the company strengthen oversight and management of systems implicated in the NEM hack,” Nikkei explained.
Coincheck promised to repay its customers a portion of their lost funds but many questioned whether the exchange had enough money to do so. The FSA announced on Thursday that it has verified that Coincheck has enough funds to repay its customers as promised.
What do you think of the FSA punishing seven crypto exchanges? Let us know in the comments section below.
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Author: Kevin Helms