The Japanese Financial Services Agency (FSA) has announced that there will be five new criteria by which all cryptocurrency exchanges operating in the country will need to abide. It is reported that the new rules are to be adhered to by both exchanges which are already operating as well as new and future exchanges applying for registration. The FSA will be conducting on-site inspections on all exchanges prior to approval in order to ensure that the companies are in line with the regulations.
Apparently, this lockdown comes owing to the aims of the agency, which are to promote regulations as well as to protect customers and assets. The agency has also said that this is important to avoid “another digital currency heist like the Coincheck scandal” where Coincheck, one of Japan’s largest exchanges was hacked, losing over $535 million USD worth of the cryptocurrency NEM.
The FSA announced that “[exchange] operators registering with the government will now need to satisfy five broad criteria.”
The five criteria, in simple form, are that exchanges:
- “will not store currency in internet-connected computers and will have to set multiple passwords for currency transfers
- will need to work harder to prevent money laundering, through such means as verifying customer identification for large transfers
- [must manage customer assets] carefully and separately from exchange assets and must have rules in place to keep their officers from using client money or virtual currencies
- will need to separate shareholders from management. System development roles will also be separated from asset management roles to keep employees from manipulating the system for their own gain“.
And finally that
- “Those granting a high level of anonymity and easily used for money laundering will as a general rule be banned“.
According to local news, these five criteria are to make up the FSA’s “new five-point framework,” which will allow the agency to “perform a detailed assessment and identify potential risks in advance”. Reportedly, those that are not willing to comply with the new five rules are quite encouraged to exit the business.