The Financial Services Agency (FSA), Japan’s crypto regulation authority, said that it is tightening its registration screening for aspiring cryptocurrency exchanges to make certain that they are properly conducting risk management, according to an article by local news outlet Japan Times yesterday, September 2.
Intensifying Four Times Over
As such, the crypto watchdog increased the application questions to about 400 queries—up about four times. Included in the inquiries are the minutes of board meetings so as to find out if there are enough discussions and consideration in terms of sustaining the company’s financial vitality and making sure that its computer systems are hack-free, according to the article. This is conducted under the country’s revised Payment Services Act, which took effect beginning in April 2017 for the sole protection of cryptocurrency users.
The intensified screenings go further than asking questions; the FSA will be conducting on-site inspections to verify the consistency of answers provided in the screening with the applicant’s resources and facilities.
Previously, the FSA would only ask questions such as the applicant’s financial status as well as system safety precautions. Now, the crypto watchdog will be reviewing the composition of the applicant company’s shareholders, on top of verifying if they are indeed involved in the decision-making processes by perusing the minutes of board meetings. Also, it will be taking careful note of whether an internal system has been established to check for links to antisocial groups.
There are over 100 companies that have expressed intent in applying for an operating license within the country, as chief cryptocurrencies like Bitcoin are considered legal tender—something Japan has which many countries, even its first-world contemporaries, do not. However, analysts said that the harsher process will inevitably force many of them to withdraw their application, and rightly so, since the FSA has already found through its on-site inspections firms that have sloppy internal controls at cryptocurrency exchanges.
In June, six notable crypto exchanges in the country received improvement orders from the FSA, including BitFlyer, Bitbank, QUOINE, BTC Box, Bit Point Japan, and Tech Bureau. According to another local media outlet, the aforementioned crypto exchanges were tasked to establish a system which complies with anti-money laundering (AML) and terrorism financing-related matters. Also, they were mandated to further improve their customer protection, as well as to create a risk management network which will be prepared to deal with new tokens and cryptocurrencies.
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