Tokyo Gateway and Mr. Exchange (based in Fukuoka) have become the latest two exchange to halt their operations as the result of the Japanese Financial Service Agency’s increasing enforcement of virtual currency laws. The FSA has tightened its grip on cryptocurrency-related activity within the country following the $532 million Coincheck hack earlier this year. Both will be returning customer funds before closure is official.

According to a report by Nikkei, the two exchanges withdrew their applications for licensure under the Japanese Virtual Currency Act, along with three other exchanges: Raimu, bitExpress, and Bit Station.

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No official statements have been given by either exchange.

A growing list of closures

On March 8, Bit Station became one of two exchanges that the FSA ordered to suspend service for a 30-day period; at the same time, the agency issued business improvement orders to five other exchanges – Mr. Exchange and Tokyo Gateway were among them.

Bit Station was reportedly targeted by the FSA after it was revealed that a senior official at the exchange had allegedly routed deposits of digital currency for his own use; FSHO’s operations were halted after the FSA determined that the exchange had failed to properly train employees and install an appropriate trade-monitoring system.

Nikkei reported that more exchanges are expected to withdraw their applications for licensure because of inability to meet the FSA’s requirements. The FSA has reportedly given fallen exchanges an opportunity to withdraw their applications before they are “[ordered] to do so.”

Crypto regulation – a ‘necessary evil’

Cryptocurrency exchanges were originally required to apply for licensure starting in April of 2017, when the Virtual Currency Act was passed. Sixteen exchanges were granted licenses, while another sixteen were allowed to continue their operations while their applications were under review.

Following the Coincheck hack, however, unlicensed exchange have been scrutinized more heavily by the FSA. The agency launched a series of on-site inspections for crypto exchanges in early February.

Japan has paved the way as perhaps the most forward-thinking country on the planet when it comes to cryptocurrency regulation. As the home of the two largest exchange hacks in history–Coincheck and Mt Gox–the country has had to be.