The Financial Regulator Cracks Whip at 7 Cryptocurrency Exchanges of Japan

2018/03/09/3/bitcoin-yen-stack-760x400.jpg

Japanese authorities have penalized seven national cryptocurrency exchanges following inspections, such as a month-long suspension for 2 exchanges.

Japan's Financial Services Agency (FSA), the country's financial regulator and watchdog, has narrowed down on cryptocurrency exchange operators using lax cybersecurity practices and inadequate money laundering measures. Two exchanges, FSHO and Bit Station, are hit the hardest with month-long business suspension orders successful today.

Over the course of its inspections, the FSA found a BitStation senior staff member had 'diverted' clients' bitcoins for personal use, the Nikkei reports. There were repeated instances of high-value cryptocurrency transactions with no judgment made about the need for notification of a suspicious transaction," the FSA stated of Yokohama-based FSHO.

Five additional exchanges — Tech Bureau, GMO Coin, Bicrements, Mr. Exchange and Coincheck, the Tokyo-based exchange that lost $530 million in stolen NEM this year — have all been hit with business improvement orders by the FSA. All seven exchanges are scrutinized for lacking appropriate internal control systems and underwhelming security measures. Two of the seven exchanges, Tech Bureau and GMO Coin, are notably registered with the FSA and are licensed to run an exchange in Japan.

Following an onsite inspection of online conglomerate GMO's cryptocurrency exchange the regulator accused the operator of failing to investigate a number of system faults and subsequent measures to prevent them from occurring again.

The FSA began scrutinizing markets soon after the Coincheck hack in late January and the ruler determined that the trade lacked measures to fight money laundering, demanding that the Tokyo-based operator guarantee a reliable and secure business operation that safeguards consumer assets. Acknowledging its second such notice now, Coincheck said it will comply with a mandate to submit its improvement plan by March 22.

After completing its first round of inspections, the FSA reportedly fears a repeat of a Coincheck-style hack after finding a multitude of concerns in customer protection and anti-money-laundering measures. While initially focusing on oversight into transactions and systems management, the FSA is currently forcing exchanges to address a broader array of issues including corporate governance and management structure.