The Financial Service Agency (FSA) has released the results from its on-going inspections of cryptocurrency exchange operators.
The report claims that the FSA suspects that cryptocurrencies are being used to fund terrorism. The report also stated that one of the virtual currency exchange platforms experienced unauthorized access. The unauthorized access affected about 260,000 victims and victims lost around 100 million Yen.
The FSA noted that it is conducting on-site inspections on all the cryptocurrency exchanges. They further revealed their plans to probe exchanges that have failed to meet up with the current growing volume of transactions volumes in the crypto market.
According to this investigation, the total asset of all cryptocurrency exchange surged from $1.18 billion to $7.1 billion between 2017 to 2018. However, some exchanges have less than 20 employees.
“In the past, exchanges were authorized to operate without a license however this regulation will help to stop the financing of terrorism. Each exchange must adhere to some strict requirements to receive an official operating license.” – FSA Officials
According to the local news platform, Nikkei, “the lack of compliance with the AML gave room for the inappropriate transfer of $532 million worth of NEM from Coincheck”. Coincheck immediately suspended all withdrawals and restricted the sales and purchase of NEM.
“The investigation procedures are being carried out with an objective to protect investor’s funds. We have already presented conditions for each exchange to observe. The conditions include the restriction of trading with altcoins.” – FSA officials.
The FSA had declared its efforts to prevent the $532 million hack of Coin check. An FSA source told the local news, Nikkei Asian, that they have been probing cryptocurrency exchanges without a detailed plan on how to check the different aspects of the exchange.
According to the source, all exchanges will be required to inspect their customers’ accounts and client’s assets that are on their platform. Each exchange must perform KYC checks, such as Multiple-password protection for large transfer. The source further claims that the government’s registered exchanges will face a ban on the trading of Monero and Dash.
Industry experts believe that this move by the FSA will strengthen Japan’s positions as the top bitcoin trading country. The FSA in conjunction with Japan’s Virtual Currency Association has announced their desire to limit the maximum volume of trade made by the exchange customers.