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.

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  Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges. Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (FCA), the US’ Securities and Exchange Commission (SEC), Australian Security and Investment Commission (ASIC), and the Cyprus Securities and Exchange Commission (CySEC) are the most widely dealt with authorities in the FX industry.In its most basic sense, regulators help ensure the filing of reports and transmission of data to help police and monitor activity by brokers. Regulators also serve as a countermeasure against market abuse and malpractice by brokers. Brokers adhering to a list of mandated rules are authorized to provide investment activities in a given jurisdiction. By extension, many unauthorized or unregulated entities will also seek to market their services illegally or function as a clone of a regulated operation.Regulators are essential in snuffing out these scam operations as they prevent significant risks for investors.In terms of reporting, brokers are also required to regularly file reports about their clients’ positions to the relevant regulatory authorities. The most-recent regulatory push in the aftermath of the Great Financial Crisis of 2008 has delivered a material shift in the regulatory reporting landscape.Brokers typically outsource the reporting to other companies which are connecting the trade repositories used by regulators to the broker’s systems and are handling this crucial element of compliance.Beyond FX, regulators help reconcile all matters of oversight and are watchdogs for each industry. With ever-changing information and protocols, regulators are always working to promote fairer and more transparent business practices from brokers or exchanges. Read this Term - 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  Mt. Gox Mt. Gox is the name of a Japan-based cryptocurrency exchange that was infamously hacked for 850,000 BTC worth roughly $450 million at the time in February of 2014. During July 2010 Mt. Gox formally launched Mt. Gox launched its exchange and price quoting service. It was subsequently sold to French developer Mark Karpelès in early 2011.Prior to its hacking, Mt. Gox suffered from other security vulnerabilities as early as June 2011. On 19 June, 2011, a security breach of the exchange caused the nominal price of a bitcoin to fraudulently drop on Mt. Gox itself, after a hacker allegedly used credentials from a Mt. Gox auditor's compromised computer to transfer a large number of bitcoins illegally to himself. Additionally, in October 2011 over 2,600 BTC was sent to invalid addresses and effectively lost. This exposed a weakness in the network protocol as a standard client would check for such an error and reject the transactions.Mt. Gox Controversy and CollapseIn early 2014 Mt. Gox suspended trading, subsequently closing its website and exchange service, and filed for bankruptcy protection from creditors. Liquidation proceedings began shortly after.During this time, the company had publicly announced that nearly 850,000 BTC belonging to customers and the company were missing and presumed stolen.Since then, nearly 200,000 BTC have since been located, though the reasons for the disappearance were unclear. The most likely scenario involves some combination of theft, fraud, or mismanagement.New evidence presented in 2015 by Tokyo security company WizSec led them to conclude that "most or all of the missing bitcoins were stolen straight out of the Mt. Gox hot wallet over time, beginning in late 2011.”At its peak, more than 70 percent of Bitcoin transactions took place on Mt. Gox. The hack was the largest in the history of cryptocurrency until the CoinCheck hack that took place near the beginning of 2018. More than 24,000 customers lost access to their money. The BTC that the exchange lost represented over 6 percent of all of the Bitcoins in circulation at the time. At the time the hack was had a seriously destabilizing effect on the price of Bitcoin and the overall sentiment around the Bitcoin network. Mt. Gox is the name of a Japan-based cryptocurrency exchange that was infamously hacked for 850,000 BTC worth roughly $450 million at the time in February of 2014. During July 2010 Mt. Gox formally launched Mt. Gox launched its exchange and price quoting service. It was subsequently sold to French developer Mark Karpelès in early 2011.Prior to its hacking, Mt. Gox suffered from other security vulnerabilities as early as June 2011. On 19 June, 2011, a security breach of the exchange caused the nominal price of a bitcoin to fraudulently drop on Mt. Gox itself, after a hacker allegedly used credentials from a Mt. Gox auditor's compromised computer to transfer a large number of bitcoins illegally to himself. Additionally, in October 2011 over 2,600 BTC was sent to invalid addresses and effectively lost. This exposed a weakness in the network protocol as a standard client would check for such an error and reject the transactions.Mt. Gox Controversy and CollapseIn early 2014 Mt. Gox suspended trading, subsequently closing its website and exchange service, and filed for bankruptcy protection from creditors. Liquidation proceedings began shortly after.During this time, the company had publicly announced that nearly 850,000 BTC belonging to customers and the company were missing and presumed stolen.Since then, nearly 200,000 BTC have since been located, though the reasons for the disappearance were unclear. The most likely scenario involves some combination of theft, fraud, or mismanagement.New evidence presented in 2015 by Tokyo security company WizSec led them to conclude that "most or all of the missing bitcoins were stolen straight out of the Mt. Gox hot wallet over time, beginning in late 2011.”At its peak, more than 70 percent of Bitcoin transactions took place on Mt. Gox. The hack was the largest in the history of cryptocurrency until the CoinCheck hack that took place near the beginning of 2018. More than 24,000 customers lost access to their money. The BTC that the exchange lost represented over 6 percent of all of the Bitcoins in circulation at the time. At the time the hack was had a seriously destabilizing effect on the price of Bitcoin and the overall sentiment around the Bitcoin network. Read this Term--the country has had to be.