The Japanese Financial Services Agency (FSA) has made its crypto exchange screening process more scrupulous, checking how rigorously risk management is conducted.
Reportedly, the number of queries to be asked has increased during screening applications about 400 times. The exchanges must now share the number of minutes spent in board meetings, to estimate whether the matters of security and financial health have been properly discussed.
The screenings of crypto exchanges were temporarily halted after a scandal in January when over half a billion dollars worth of crypto assets were stolen from Coincheck Inc., a bitcoin wallet and exchange service based in Tokyo.
The FSA screenings consist of on-site inspections, confirming the prior sent in a list of questions. Before the incident, the required questions were only regarding the financial status of the applicant and the actions are taken to guarantee system safety.
Now, reportedly, the screenings will be more rigorous, with inquiries into the involvement of the executives in the processes of decision making by monitoring time spent in board meetings, since the inspections have established that a lack of board meeting minutes leads to carelessness regarding internal control. The shareholders of the applicants will be reviewed, as well as the social situation within the company.
The strictness of the new screenings hasn't wavered the desire of most companies to be registered as a crypto exchange.
WHY IS THIS IMPORTANT?
- Stricter rules for exchanges means more security for the users, which means less potential losses from security breaches.
- The fact that the FSA is ready to start screening and registering crypto exchanges again is good news to the companies waiting to gain the status of a crypto exchange in Japan.