On Wednesday, yet another “administrative punishment order” was issued by the FSA to a cryptocurrency exchange.
This time, the Tokyo-based “Minnano Bitcoin” (“Everybody’s Bitcoin Inc.” in English) was the target. The order was submitted after the FSA conducted an on-site inspection of the exchange following the submission of a system risk management report. Minnano is currently legally operating as a “deemed dealer” of cryptocurrencies while its application for licensure under the FSA is under review.
The FSA took issue with Minnano’s “compliance with laws and regulations and proper operation of the business.”
More specifically, the FSA said that the exchange was “not performing appropriate verification at the internal audit in addition to the inadequate management and management system…It also has the problem of preventing money laundering and terrorist financing, preparing and preserving statutory books, providing appropriate information to users, [and] effective control over system risks and outsourcers.”
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The order listed five specific ways that the exchange needed to improve itself, including “building a business management system; establishment of a management system for money laundering and terrorist financing; construction of bookkeeping management system; establishment of management system related to user protection measures; [and] construction of system risk management system and outsourcing management system.”
The improvements must be made by May 14th.
Japan Cracks Down
Following the order, Minnano publicly stated that “we take this administrative punishment solemnly and sincerely, [and will] establish a posture for the proper and reliable execution of the virtual currency exchange industry, regulate the virtual currency exchange trader and recover the customer’s trust with full power.”
The Japanese Financial Services Agency has been cracking down on crypto exchanges for months in the wake of the $532 million Coincheck hack. All crypto exchanges in Japan were required to apply for licensure under the Virtual Currency Act that was passed in April of 2017; after Coincheck, the FSA has been enforcing the VCA with increased vigilance.
In addition to conducting rounds of in-person exchanges, a growing number have been graciously offered the opportunity to voluntarily withdraw their applications instead of being denied outright. Tokyo Gateway and Mr. Exchange are the two most recent exchanges to close their doors.