Japanese Regulator Begins Punishing Cryptocurrency Exchanges Post-Inspection

An unspecified number of exchanges will be told to suspend operations too.

Nikkei has reported that the Japanese financial regulator, the Financial Services Agency, has issued punishment notices to several cryptocurrency exchanges.

An unknown number are also going to receive suspension notices.

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The FSA has been investigating exchanges since 534 million USD worth of cryptocurrency was stolen from Coincheck, a popular exchange, in January. This was the world’s biggest cryptocurrency theft at that point. At the time, the regulator said that it will be conducting on-site checks of trading venues.

The first set of inspections is now complete. According to the report, the FSA has decided to dole out punishments as a result of lax security on the part of the exchanges in connection with customer protection and anti-money laundering measures. The suspension notices are punishment for exchanges continuing to operate while their ‘Payment Services Act’ applications are still being processed.

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The regulator is also going to issue a ‘business improvement order’ to Coincheck, and will be monitoring the progress of client compensation. The exchange has committed to repaying approximately 46.3 billion JPY to customers, according to Reuters, but has not specified when this will happen.

Japan recognised cryptocurrency as legal tender in April of last year, and introduced a cryptocurrency dealer licence after ruling that such entities must be regulated. Eleven firms were granted a Virtual Currency Exchange License in the first round of issue.

The theft from Coincheck was reportedly a result of NEM tokens being stored in a relatively basic wallet. All the perpetrators had to do was gain the access code, and then they simply took the money.

In the aftermath of the Coincheck attack, the Japan Cryptocurrency Business Association and the Japan Blockchain Association announced that they would be setting up a self-regulatory body that exchanges can join.

 

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