Japan Unveils New Guidelines for Cryptocurrency Exchange Registration Process

Japan Financial Services Authority has unveiled a new set of regulations that cryptocurrency exchanges will have to meet pending regulatory approval to operate in the Country. The new rules go beyond checks on financial health and system safety measures, as the regulator seeks to bring sanity into the embattled sector.

The number of questions that cryptocurrency exchanges will have to ask applicants prior to approving their account applications now stands at 400. The questions go beyond just trying to find out applicants financial status and identity. Increased background checks are part of the regulator’s bid to try and stop money laundering in the sector.

While analyzing exchanges eligibility for approval, the FSA will also asses a company’s executives as a way of ensuring they are involved in decision making. The review process will also seek to analyze a company’s internal systems as a way of uncovering links to antisocial groups.

This will be the first time that FSA starts screening cryptocurrency exchange applications after suspending the same earlier in the year following the Coincheck hack incidence.

Regulators have had to increase their scrutiny of the cryptocurrency sector in Japan, in the wake of a massive breach at Coincheck that led millions of losses early in the year. The FSA has already conducted a series on on-site inspection in 23 cryptocurrency exchanges from which it says it discovered sloppy internal controls that pose significant risks to customers.

Following the inspection, the agency issued improved orders to six fully-licensed cryptocurrency exchanges that it said did not meet the thresholds to act as investment vehicles given dire internal control measures. 13 out of 16 exchanges allowed to operate have already withdrawn their applications.

Amidst the increased scrutiny, cryptocurrency remains a hot commodity in the island nation. Regulations appear to have brought some form of confidence in the sector something expected to spur growth. The FSA has already received 160 crypto exchange applications of firms looking to open operations in the country.

Even as Japan embarks on a regulatory approach of the cryptocurrency sector, the same cannot be said about China and India which have imposed total bans.