Japan’s FSA Has No Intention To Excessively Regulate Cryptocurrency

News, Regulation | August 23, 2018 By:

Toshihide Endo, commissioner of Japan’s Financial Services Agency (FSA), said that the agency has “no intention” to introduce “excessive” regulations on the country’s crypto industry.

In an interview with Reuters, Endo said that the FSA was trying to strike a balance between protecting consumers and promoting technological innovation.

“We have no intention to curb (the crypto industry) excessively,” Endo said. “We would like to see it grow under appropriate regulation.”

In April 2017, Japan became the first country to adopt formal regulatory measures for cryptocurrency exchanges. The FSA licensed the first 11 exchanges in September 2017. In early December 2017, it licensed another four, and at the end of December 2017, it licensed the 16th exchange. In January of this year, however, the agency took a tougher stance towards the industry after crypto exchange Coincheck lost over half a billion dollars in a hack.

The Coincheck hack prompted the FSA to conduct on-the-spot inspections for all exchange operators to look for security gaps. In March, it issued immediate improvement orders to seven exchanges, even requiring two to temporarily suspend operations.

Earlier this month, the regulator released the results of a variety of on-site inspections that took place in 23 cryptocurrency exchanges around the country. Seven out of the 23 are fully licensed crypto exchanges, the rest are “deemed dealers,” which are exchanges that have been allowed to operate while their applications are being reviewed by the agency.

According to the FSA, the inspections revealed a sloppy reality that the maintenance of the internal control system has not kept up with the rapid expansion of transactions. The risk was not evaluated for each virtual currency and it was judged that securing necessary personnel for counter measures such as money laundering was insufficient at multiple vendors.