Why Leading Cryptocurrency Exchanges Withdraw From Japan?
Many leading cryptocurrency exchanges are pulling operations from one of the biggest markets for cryptocurrency trading.
Huobi Pro is suspending trading services in Japan from July 2. BigONE, a trading platform created by Chinese bitcoin tycoon Li Xiaolai, has stopped providing KYC services to users in Japan since June 29. US-based exchange Kraken similarly ceased Japanese operations in April.
It’s widely considered that Japan is a heaven for crypto enthusiasts from around the world as its government has recognized bitcoin as a legal form of money and the financial watchdog issued operating licence to 11 crypto exchanges in 2017.
So what are the reasons behind foreign trading platforms’ withdrawing from Japan?
Industry insiders think this initiative is closely linked to the January $532 million hack of NEM from Japanese crypto exchange Coincheck which affected over 260,000 crypto investors. In response to the event,the Financial Services Agency(FSC), Japan’s financial regulating body, has ramped up its scrutiny into Japan’s domestic crypto exchange industry and cracked down on crypto frauds and illegal fundraising through ICO.
FSC conducted ‘spot checks’ across 32 exchanges, both registered and unregistered in February. On March 8, Japanese regulators issued punished notices to 7 cryptocurrency exchanges and ordered two of them, Bit Station and FSHO, to suspend their operation, in an effort to shore up consumer protection. And the Japan Virtual Currency Exchange Association (JVCEA), a self-regulatory body, released almost 100 pages of voluntary regulation proposal seeking to help both consumers and exchanges alike. Japanese government’s tightening regulatory grip force foreign entity to exit from Japanese market.
In addition, in order to protect the interests of domestic exchanges, most of crypto operating licenses are obtained by those that are backed by domestic financial conglomerates. Thus foreign crypto exchanges can hardly receive the licence. Therefore,financial regulators’ over protection of domestic exchanges limits the blockchain market growth in Japan to a certain extent.
However, some analysts don’t believe Japan’s blockchain industry is in a bubble. The industry in Japan grows in an orderly manner and focuses on applications of the technology to create real business value. There are professional exchanges in the country for investors to trade cryptos, meanwhile, medias warn them of relevant risks through various channels. This signals that Japan remains rigorous on the development of new technologies like blockchain.
But for exchanges, there is nothing permanent, except profits. Leaving Japan, many exchanges like Binance has moved to Malta, a new hub for cryptocurrency companies.