The Financial Services Agency (FSA) of Japan has conducted on-site examinations of 23 crypto exchanges and issued a report with all the findings.
The FSA inspected the work of 23 exchanges and came to the conclusion that stricter review policies for new exchanges applying for registration need to be implemented. Out of the 23 inspected, only 7 were fully licensed exchanges, while the others were permitted to operate during the reviewal of their applications.
January’s Coincheck hack, when almost $500 million worth of crypto was stolen, served as the main reason for the agency’s inquiry
Using the information from these findings, the FSA is planning to make the procedure of acquiring an official license stricter, implementing on-site inspections, and assessing the business model effectiveness. They voiced concerns over a lack of anti-money laundering measures in some of the exchanges and numerous problems beginning with the business models and ending with the management of the companies.
The agency claims that at the moment there are “hundreds” of firms that are on the waiting list to be reviewed.
The agency’s investigation revealed that the internal control systems weren’t maintained properly and were not handling the brisk rise of transaction volumes. In addition to that, the FSA discovered that the Japanese crypto assets had grown six times in the space of just one year, however, the firms had less than 20 employees, which means that one worker handles roughly $29.7 million worth of crypto.
WHY IS THIS IMPORTANT?
- Japan is moving in a direction where crypto firms and governmental structures are working together at improving the crypto ecology in the country.
- The FSA is interested in both creating a strict form of regulation for the crypto exchanges but also making it possible to legally and under supervision operate in such a line of business.