The crypto-friendly Japanese markets became the target of one of the biggest heist in crypto history a few months ago. Since then, Japan’s Financial Services Agency (FSA) has taken a few strict steps to curb activities at cryptocurrency exchanges. In a recent effort to protect investors, the regulatory authority has introduced new regulations for new exchanges in the country. This will include tighter screening for new applicants, as well as higher standards for risk management. An exchange’s links to antisocial elements and an assessment of its decision-making process will also be scrutinized.
Providing More Safety to Users
FSA has increased the number of questions asked during screening applications from 100 to 400. The questions requested previously focused only on the applicants’ financial status and the measures they adopt to keep their systems secure.
Applicants are now also mandated to submit minutes of board meetings. The agency intends to ensure that the companies have a sound decision-making process that could further guarantee the sustainability of their financial health. It also hopes to assess whether or not company executives are involved in the decision making.
The Japan Times reported that the agency has “tightened its registration screening for cryptocurrency exchanges to see whether they are properly conducting risk management.”
Enhanced Screening Process Checks Shareholders
The news outlet also reported:
“The upgraded screening process also regularly reviews the composition of an applicant company’s shareholders, while examining if an internal system is in place to check for links to antisocial groups.”
Over 100 companies have applied for a cryptocurrency license in the country. These new regulations could discourage some of them.
After January’s Coincheck hack, the financial authorities in Japan have become very active in the crypto markets. The FSA recently inspected 23 crypto exchanges and found “sloppy internal controls,” which includes a lack of “board meeting minutes,” as revealed in reports.
During the inspections, six fully licensed crypto exchanges in the country were issued business improvement orders. Another 16 quasi-exchanges were operating in the country at the time. These exchanges have been allowed to do business while their applications are being reviewed. At the moment, 13 of such exchanges have already withdrawn their application.