Japan has tightened the grip on the requirements that cryptocurrency exchanges must meet to gain approval to operate the in the country. The country?s Financial Services Authority has unveiled a new set of conditions that exchanges must adhere to, while in pursuit of approval license.
FSA cryptocurrency Regulation
Unlike in the past when exchanges only had to prove their financial health and safety measures, such entities will now have to gather sufficient information about their customers. For starters, the agency has released a set of 400 questions the exchanges will have to ask their prospective customers before opening accounts.
The checks are designed to ensure exchanges have a clear view of who they are dealing with as a way of averting cases of people using cryptocurrencies for money laundering. In addition, the FSA is to assess cryptocurrency exchange?s management team as a way of ensuring executives maintain an active role in decision making. The agency is also to analyze the composition of an applicant?s shareholders in addition to checking out internal systems to check whether they have ties to antisocial groups.
?It [FSA] now obligates applicants to submit minutes of board meetings so it can check whether enough discussions have been held about measures to sustain the company?s financial health and ensure the security of its computer system,? a source said.
FSA On-site Inspections
The ramped up requirements for cryptocurrency requirements comes on the heels of Coincheck suffering one of the biggest hacks that resulted in the loss of 500 million worth of cryptocurrencies. Following the incidence, the FSA started conducting on-site inspections on cryptocurrency exchanges as it tried to asses control measures put in place to put hackers at bay.
On-site inspection resulted in the withdrawal of licenses of six companies. 13 of the 16 exchanges that were allowed to continue operating awaiting the outcome of the review process have since withdrawn their applications. Increased scrutiny and regulation is part of the FSA latest push that seeks to bring some form of sanity in the volatile yet risky sector.