BY CNA team - August 11, 2018
Deeper scrutiny for firms applying for Japanese crypto exchange licenses
Japan’s Financial Services Agency (FSA) will be setting the bar much higher for companies who want to apply for licenses to operate cryptocurrency exchanges.
The decision came about after the country’s financial regulator found that exchanges’ internal control systems could not keep up with the rapid growth of trading volumes while most companies operating exchanges have an average headcount of less than 20.
This headcount worked out to one employee managing US$29.7mil worth of assets on average after the crypto markets surged US$7.1bil or an over six-fold increase within the space of one year.
The findings were published after the FSA conducted on-site inspections of the firms behind the exchanges.
Besides the more rigorous oversight into new applications for licenses, those newly registered would be required to go through on-site inspections at and early stage while the FSA will be studying their business models.
The FSA identified a number of problems including compliance, internal audits and corporate governance.
It says investor protection remains the priority with the need for ongoing review of registration procedures.
Japanese regulators have been keeping close taps on the exchanges after the January hack of the Coincheck exchange resulted in the loss of US$532mil.