Regulators in Japan suspends 2 Crypto exchanges for loose compliance
Two of the domestic cryptocurrency exchanges were ordered to suspend its operation for a month in Japan. FSHO and Bit Station faced the brunt when Financial Services Agency of Japan issued an order to immediately suspend the operations. A total of seven trading platforms were asked to improve security measures. These platforms have to submit an improvement plan in writing by the end of this month.
The action follows a $500 million heist dating back to January at Coincheck, which is one of the largest cryptocurrency operators. Coincheck was targeted by hackers when they broke into its systems and stole about $500 million XEM cryptocurrency which was a property of around 260000 customers. Although Coincheck vowed to pay back the money, the trading of the platform remains suspended until the security is improved upon.
An investigation into the theft has led the Regulatory authority to take notice of Poor conformity with the anti-money-laundering standards of the country, misappropriated cryptocurrencies, poorly trained staff, etc. Trading platforms asked to improve on the measures include Mister Exchange, Coincheck, Bicrements, Tech Bureau and GMO Coin.
Finance regulators have expanded the probe after discovering that the internal systems were inadequate to tackle money laundering. A study group has already been established to check on the institutional issues regarding cryptocurrency. Japan is tightening the regulations as the surge in cryptocurrency markets is evident in the country as well as in other parts of the world.
Japan is the first country in the world to regulate cryptocurrency exchanges. A total of sixteen exchanges are already registered with the authorities, and as many as sixteen more exchanges were allowed to operate as the regulatory authorities are assessing their papers. Japan is working on improvements to protect customers, but the recent fiasco has raised a question mark on the scrutiny of the regulatory authorities. One of the suspended exchanges, FSHO faced the ire as the staff deployed by the platform were not trained adequately and were not following internal procedures. Many cases of high valued cryptocurrency transactions were allowed without any flag or notification. FSHO stands suspended until April 7.
The recent shake-up in Japan’s cryptocurrency exchange market is likely leaving an impact as weak exchanges face the risk of going out of business and stronger ones grasping to the major market share. Japan has been the only jurisdiction in the world to have embraced and regulated the trading of the cryptocurrencies. A tighter series of regulations is expected from the country to avoid thefts and frauds in the future. Hacking has been one of the major problems for the cryptocurrency market, and some of the biggest attacks have been carried out in past few months. With Coincheck being one of the targets, a small Italian exchange known as BitGrail has fallen prey to the hacking. BitGrail was hacked in February this year, and an estimated $170 million in cryptocurrency ‘Nano’ was stolen. Hacking has duped the exchanges by about $1.4 billion so far. Safety and security standards for these platforms need revamping so that such heists can be avoided in future and Japan is working towards that.