The regulatory tide is rising in the United States when it comes to cryptocurrency. Recently, Finance Magnates spoke with bitFlyer COO Bartek Ringwelski about how the exchange is working to stay ahead of the shifting regulatory landscape.
Bartek is responsible for running bitFlyer’s San Francisco-based US office, which was opened in 2017. bitFlyer US was officially launched at the end of November in 2017.
Bartek explained that bitFlyer is “a global Bitcoin and virtual currency exchange, as well as a blockchain RND company headquartered in Tokyo.” The company was started in 2014 by two alumni of Goldman Sachs who have managed to grow bitFlyer into “the largest virtual currency exchange in the world” over the past four years.
bitFlyer also launched in Europe in January of this year.
Bartek explained that bitFlyer has branded itself as “one of the most professional exchanges” in the world. The US branch has been licensed as a money transmitter in 44 states.
Additionally, the US branch of bitFlyer will soon be merged with the Japanese branch, which will be “really powerful for [bitFlyer’s] trading community.” This is because the merge will “allow US traders to have access to Japanese liquidity.”
— bitFlyerUSA (@bitFlyerUSA) January 5, 2018
“Japan is really the epicenter of all Bitcoin trading activity. More than 50 percent of all Bitcoin trading happens out of Japan, and bitFlyer owns about 70 percent of all the Bitcoin trading market share in Japan. By linking our order books with Japan, US residents will have [access to] unprecedented levels of liquidity and order book depth.”
Bartek says that in addition to liquidity, bitFlyer provides its traders with a valuable set of trading tools: “We can create chained and conditional orders that otherwise would require an API through our web interface.”
“Of course,” he added, “we do have an API.”
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Throughout this year, bitFlyer will also be adding products and services geared toward individual consumers–people who aren’t professional traders, but may be entering the virtual currency space for the first time.
bitFlyer is also in the midst of a no-fee trading promotional period that will stop at the end of this month.
Regulations and Compliance
With the rapidly changing regulatory landscape surrounding crypto in the US, we asked Bartek how bitFlyer is working to stay compliant and avoid legal problems in the US. “One thing that [bitFlyer has] done in Japan that’s been really successful is to be really proactive about interacting with regulators. That’s very much the stance that we’re taking in the US,” he said.
“Even though we launched in November, we started down the path of acquiring licenses a year prior to that, which may not be a typical approach. I think a lot of companies would have started by launching in the no-action phase and then slowly gaining approval as they expand.”
“What we wanted to do is to understand the overall regulatory ecosystem… and build a platform that was the most compliant,” he explained. “It’s no surprise that this space is getting more and more attention from regulators as it becomes a larger market.
He also said that bitFlyer has been considering self-regulation. “There have been a couple of proposals recently for self-regulation among this industry–I think that’s a very interesting angle for proactively engaging with other players in the space who we think are doing things the right way. This also gives regulators a point of interface to ask questions. Without that, it’s kind of a free-for-all of different regulatory bodies wondering what part of this space they should sort of ‘own.’”
“I think that the more proactive the whole industry is–and the more proactive that bitFlyer is–the more protection consumers will have, and regulators will have a better point of contact.”
Silver Lining: When Hacks Happen, Industry Security Improves as a Whole
Because bitFlyer is the largest Bitcoin exchange in Japan, we asked Bartek about the actions that Japanese regulators have taken following the $500 million Coincheck hack. “They’re not so much cracking down in Japan as they are becoming more vigilant,” Bartek said.
“Japan created the world’s first virtual currency exchange license, which is administered by the Japanese Financial Services Agency. Following the Coincheck hack, I think that the FSA has reexamined a lot of the participants who have been given licenses as well as those who are applying for licenses and making sure that their standards are sort of ‘up-to-snuff.’ I think that in some of those cases, they’ve asked for participants to strengthen certain areas.”
“The silver lining for an event like Coincheck is that [in the long term], it increases exchange security, which will ultimately benefit the industry.”
Bartek added that the fact that the infamous Mt Gox hack happened in Japan is “why Japan is on the forefront of the regulatory oversight…as a result, regulators were forced to deal with a lot of the things that regulators outside of Japan are now either dealing with or worried about.”
“Every time that an event like this happens, there is increased regulatory scrutiny, but the silver lining is that customers are better protected. bitFlyer’s position has always been to embrace that regulation, and in a lot of ways, help to shape that regulation.”
For example, bitFlyer’s founder, Yuzo Kano, is the Chairman of the Japan Blockchain Association. Bartek explained that the association “worked closely with the FSA to form virtual currency laws.”
“We want to be working closely with regulators to increase the overall trust that consumers have in the platform. Every time that something happens, it’s an opportunity for us to understand what went wrong, and to strengthen the security measures to reduce that risk again in the future.”