Japan’s Financial Services Agency Introduces Stricter Guidelines For Crypto Exchanges

News, Regulation | May 7, 2018 By:

Japan’s Financial Services Agency (FSA) is set to implement stricter guidelines for cryptocurrency exchanges in the country.

The FSA is reportedly intensifying its efforts to avoid another heist like the one that befell Coincheck in January, in which the exchange lost over $400 million in XEM tokens to hackers.

Under the new framework, local crypto exchanges will now be required to manage client assets separately from those of the exchange, monitor customer accounts multiple times daily for suspicious fluctuations, and store crypto holdings on offline systems only.

There will be new restrictions on the kinds of cryptocurrencies allowed at government-registered exchange operators. The regulator will ban those cryptocurrencies that offer a high level of anonymity and are used for money laundering activities. Exchanges would also have to ramp up their efforts to prevent money laundering. These includes know your customer (KYC) checks, such as ID verification, and multiple-password protection for large transfers.

An FSA source said that the new framework will let the agency perform a detailed assessment and identify potential risks in advance.

“Without the necessary know-how, we’ve been feeling our way through the dark on how thoroughly we should check these different aspects,” the source said.

The new rules is expected to come into effect when the FSA begins accepting applications for registration. Existing crypto exchnage operators would also be required to meet these requirements.