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Japan’s Financial Watchdog Sent Warnings to Leading Crypto Exchanges

Japanese Financial Service Agency (FSA), the financial regulator of Japan, is keep strengthening regulations against domestic cryptocurrency operators. A handful of major Japanese exchanges including industry leader bitFlyer, have received business improvement orders from the financial regulator on June 19th.

A man walks past a sign of Japan's Financial Services Agency (FSA) at its headquarters in Tokyo November 5, 2013. REUTERS/Toru Hanai

Although digital currency transactions grow rapidly in Japan, some exchange operators still failed to take sufficient measures against money laundering activities. The five crypto exchanges listed by FSA include bitFlyer, Quoine, Bitbank, BitPoint Japan and BtcBox. All of these listed exchanges are notably registered under the revised payment services law enforced in April last year. BitFlyer, Quoine and Bitbank the largest crypto exchanges both in Japan and in the world.

According to the FSA inspections, exchanges listed above “do not have the proper internal management systems, including their measures to prevent money laundering”. The FSA also takes a tough attitude towards their rapidly expanding customer assets.

The rumor in question metions whether Bitflyer will “stop operations temporarily.” According to the latest announcement launched by the firm, they are about to establish a management system for existing customers, in order to re-examine the status of costumer authentication, formulate appropriate preventive measures, and steadily implement further improvement plans.

BitFlyer also disclosed the details of FSA’s business improvement order, which includes taking measures to ensure a proper functioning of their daily business, establishing an anti-money laundering and terrorist financing risk management system, establishing a mature supervisory system for user information security management and so on.

The FSA also clarify that, instead of a rejection of registration, this administrative penalty is just a business improvement order. The financial regulator further indicated that the improvements take place in exchange management have failed to keep pace with the development of virtual currencies.

“Majority of crypto exchange operators have ‘flaws’ in their internal management system while their holdings of customer assets increase exponentially.”

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