Japan’s financial watchdog, the Financial Services Agency (FSA), will be issuing business improvement orders to five registered cryptocurrency exchanges by the end of this week, Cointelegraph Japan has reported.
According to the report, published earlier today, the FSA inspectors have concluded that BitFlyer, Quoine, Bitbank, BITPoint Japan and BtcBox do not have the proper internal management systems, including their measures to prevent money laundering. Bitbank, Quoine and BitFlyer are among Japan’s largest crypto exchanges, the publication notes. The report has yet to be confirmed by any of the parties mentioned above.
Issuing such orders has become a common practice for the FSA, which has ramped up its efforts to regulate the sector following the hack of local crypto exchange Coincheck. The cyber-attack, which resulted in the theft of over $500 million worth of NEM tokens in January, prompted the regulator to begin inspections of local crypto exchanges, checking for security flaws that could enable money laundering or endanger customers’ funds. Following the inspections, the regulator has issued a number of business improvement orders, as well as a few suspension orders.
Earlier this month it was reported that the FSA might issue its first registration denial to a domestic cryptocurrency trading platform called FSHO, due to its previous failures to comply with existing Japanese financial rules. The platform, which had previously received two suspension orders, failed to implement the required know-your-customer procedures and subsequently failed to report suspicious transactions possibly indicating money laundering, according to the FSA.
Under Japanese law, domestic crypto trading platforms must be registered with the FSA in order to continue their operations. The FSA recently revealed that following the Coincheck hack, eight platforms had indicated that they would withdraw their applications. However, the watchdog added that about 100 firms were looking to enter the market.