The Japanese Financial Services Authority (FSA) has introduced stricter screening protocols for cryptocurrency exchange platforms that wish to operate in the country.
More Robust Screening Paradigm
According to Japan Times, the FSA has upgraded its screening process to make it more robust and stricter for digital currency exchanges who wish to operate in Japan. The regulatory body’s screening exercise follows a revision of the Payment Services Act which became effective in April 2017 to safeguard users of cryptocurrency.
Part of the FSA’s robust screening exercise includes an increase in the applicant questionnaire to 400 items, which is four times higher than the previous paradigm. Crypto exchanges will also be mandated to present minutes of their board meetings to the regulatory body to ensure that their discussions include talks about financial stability and system security.
With the latest upgrade, the FSA plans to evaluate the participation of executives in the decision-making process by going through board meeting records. The robust screening exercise will also review the make-up of the cryptocurrency exchange platforms’ shareholders. In addition to these, it will also check if companies have in-house systems that watch out for antisocial group links.
Over one-hundred companies have indicated interest to be registered, but analysts predict that with the agency’s stricter screening exercise, some companies might give up the idea.
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FSA and the Japanese Cryptocurrency Exchange Arena
The Coincheck hack of January 2018 gave the agency an insight into the lack of adequate security plaguing most crypto exchange platforms. The Japanese watchdog issued a “business improvement order” to Coincheck and six other exchanges for their lapses.
Formerly regarded as the number one crypto-friendly nation in the world, Japan became a haven for crypto exchanges following the China ban in 2017. In April 2017, Japan officially pronounced Bitcoin as a legal form of payment. It was the first country to create any kind of regulatory framework for digital currency exchanges.
After the Coincheck hack, however, the FSA tightened its grip on cryptocurrency exchanges and laid down strict rules to protect investors. Binance and OKEx, among others, felt stifled by the agency’s regulatory framework and decided to camp elsewhere. Binance later moved its operations to Malta. Recently, the FSA upgraded its regulatory policies to tackle the rise of speculative virtual currency investments in Japan.