Japan’s Financial Services Agency Tightens Registration Process For Crypto Exchanges

News, Regulation | September 3, 2018 By:

Japan’s Financial Services Agency (FSA) has reportedly introduced a stricter screening process for crypto exchanges seeking approval to operate in the country.

Japan Times reported that the FSA has tightened its registration screening for crypto exchanges in order to “to see whether they are properly conducting risk management.” Citing unnamed sources, the publication said the regulator has “increased the number of questions asked when screening applications to about 400 items, up fourfold.” Crypto exchanges will also be required to “submit minutes of board meetings so it can check whether enough discussions have been held about measures to sustain the company’s financial health and ensure the security of its computer system.”

The sources added that the watchdog will also regularly review the composition of shareholders of an applicant company, while checking if it has an internal system to check for links to antisocial groups.

The Japanese government legally recognized cryptocurrencies as a legal method of payment after revising the Payment Services Act in April 2017. Under the legislation, local exchanges are required to register with the FSA. At one point, there were 32 crypto exchanges operating in the country, 16 of which have received approval from the FSA. The remaining 16 have also been given approval while their applications are being reviewed. These companies are sometimes referred to as “quasi-operators.”

However, after the hack of Coincheck in January, the FSA introduced tighter regulations for exchanges and conducted on-site inspections. As as result, 13 quasi-operators have withdrawn their applications. These include Tokyo Gateway, Mr. Exchange, Raimu, Bitexpress, Bit Station, Campfire, Debit, and Payward Japan, which operates Kraken exchange. Only three quasi-operators are left – Coincheck, Lastroots, and Everybody’s Bitcoin.

In July, the FSA revealed that more than 100 companies were interested in applying for a license to operate a crypto exchange, including Line Corp and Yahoo Japan.