Japanese FSA Imposes Five-Point Regulatory Criteria for Cryptocurrency ExchangesMay 7, 2018, 2:51PM
Japanese financial watchdog FSA has decided to impose tougher regulatory guidelines for cryptocurrency exchanges operating in the country.
According to reports from local Japanese media outlet Nikkei Inc., Japan’s Financial Services Agency is expected to begin implementing a new set of tougher regulations for cryptocurrency exchanges in the country. It has highlighted a five-point criterium on the basis of which it will decide whether a particular cryptocurrency exchange can operate legally or not.
Up to now, the Japanese government has largely been the global leader in terms of accepting the use of Bitcoin and other cryptocurrencies as legal tender. However, after the Coincheck hack of January 2018 resulted in citizens losing an estimated $500 million, authorities have deemed it necessary to regulate the crypto trading industry.
The FSA has mandated that cryptocurrency exchanges must comply with the new regulation to ensure that Japanese citizens do not suffer any further financial losses. Digital currency exchanges will no longer be allowed to manage and store users' cryptocurrency in hot wallets, forcing them to use offline storage for customer holdings. No company employee should be allowed to divert a user’s digital currency for any other use elsewhere. Exchanges will also need to employ two-factor authentication model for currency transfers. Furthermore, the FSA expects all exchanges to fully comply with all KYC laws and monitor user accounts for suspicious fluctuations. A blanket ban on trading in privacy-oriented coins will also be imposed in the near future.
The FSA’s new regulation clearly aims to improve investor confidence in the cryptocurrency trading market, which has been dampened by the hacks at Coincheck and the now infamous exchange, Mt. Gox. The regulatory body will also review documents submitted by cryptocurrency exchange operators to the government.
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