Japan is a crypto-friendly country. While other countries are trying to understand the scope of cryptocurrencies, Japan had already made way for institutional blockchain development and shown interest in crypto assets. However, as more entities are seeking cryptocurrency exchange licenses, Japan’s Financial Services Agency (FSA) is having a hard time handling the applications. The agency is now getting ready to handle the large influx of applications.
FSA Doesn’t Want Another Hacking Incident
In January this year, one of Japan’s prominent cryptocurrency exchanges, Coincheck, witnessed the largest theft in crypto history. Digital assets worth about $530 million were stolen from the exchange. This included over 500 million NEM tokens. The exchange was blamed for holding weak security measures that allowed hackers to dive into their systems. Though the exchange subsequently tried to repay the damages, it left a lasting impression on the regulators.
It is clear that the FSA doesn’t intend to create another scandal that threatens Japan’s status as a crypto-friendly but equally secure ecosystem.
What Is the FSA Doing to Tackle the Issue?
The FSA will add 12 personnel to its workforce. The new staff will help in handling the growing number of cryptocurrency exchange applications with the agency. Reuters Japan reported that the FSA vice commissioner for policy coordination, Kiyotaka Sasaki, is working with a team of 30 people to review new license applications.
At a crypto exchange study group meeting on Wednesday, Sept. 12, Sasaki noted that over 160 firms are currently seeking review of license applications. He said that the number of professionals to handle these requests is insufficient, and it would need additional people to handle its “biggest problem.”
The FSA has been reviewing 16 cases, according to a document released after the meeting. Around 12 of these applications have already been withdrawn and one rejected by the FSA. The remaining three applications are under review by the agency. One of them is Coincheck. The agency insists on creating better risk profiling systems and working with other related ministries.
The regulator is also concerned about lack of sufficient antimoney laundering (AML) and measures for preventing terrorism financing adopted by the exchanges. It is also looking into the compliance and risk management, corporate governance, internal audit mechanisms and business models of these exchanges.