Cryptocurrency exchange platforms across Japan should now follow a more stringent procedure to conduct their operations legally, after the country’s financial authority has strengthened its evaluation system in this area.
Sources at the Financial Services Agency (FSA) told The Japan Times that the new rules aim to ensure that future cryptocurrency exchange platforms are carrying out proper risk management. The FSA evaluation process had been suspended after 58 billion Yen (about $530 million) was stolen from customers in January following a cyber attack on the Japanese exchange house Coincheck.
Applicants now have to answer to about 400 inquiries, almost four times more questions than in the original procedure, the Japanese news portal reported. Additionally, the evaluations provide for on-the-spot inspections by the FSA to verify the truthfulness of the answers.
Among the new requirements that candidates are required to submit, there is information regarding the board meetings which gives clues about the financial health of the company and the security of its IT system. This data also allows FSA officers to assess whether company executives are adequately involved in decision-making.
The hacking of the Coincheck platform forced the Japanese authorities to tighten up the control over cryptocurrency exchange companies
The control over the cryptocurrency exchange platform conducted by the Japanese financial authorities was tightened after the multi-million dollar robbery on Coincheck.
By March, five Japanese crypto trading platforms had already closed their doors because they were unable to comply with the Financial Services Agency (FSA) regulations. Others were temporarily suspended by the agency to catch up with the regulations.
Additionally, in April, a group of sixteen FSA-approved cryptocurrency exchange platforms across Japan set up the Japan Virtual Currency Exchange Industry Association with the aim of establishing self-regulatory measures to protect users and prevent cases such as the one that involved Coincheck.
More recently, in June, the FSA issued orders for commercial upgrades to six crypto trading platforms after conducting on-site inspections. The measure required operators to improve their internal audit and user protection systems.