Five New Criteria For All Cryptocurrency Exchanges In Japan
Nikkei reported on Sunday that the Japanese Financial Services Agency abbreviated FSA, has set new rules for the registration of cryptocurrency exchanges. The aim of the agency is to push for an agreement or complaisance and protect customer assets and even, “forestall another digital currency heist like the Coincheck scandal,” as added by the news outlet.
In January, one of the largest crypto exchanges in Japan, Coincheck, was hacked and they lost 58 billion yen (which is about US$531 million) worth of the cryptocurrency NEM. Since then, Monex Group, a leading online brokerage firm, acquired the exchange.
An FSA official explains that the registration process will now include preliminary visits to ascertain how the exchanges operate. This move is in addition to documentation. Details contained in the publication said: “Exchange operators registering with the government will now need to satisfy five broad criteria.”
The first of the five criteria is about system management. The agency will make sure that exchanges “will not store currency in internet-connected computers and will have to set multiple passwords for currency transfers.”
The second criterion is about money laundering safeguarding measures. Exchanges “will need to work harder to prevent money laundering, through such means as verifying customer identification for large transfers.”
The third criterion concerns the management of customer assets. It is the FSA’s objective to ensure that they are “carefully managed separately from exchange assets.” The news outlet reports that exchange operators will be required to check customer account balances multiple times a day for signs of diversions and “have rules in place to keep their officers from using client money or virtual currencies.”
The fourth of the criteria is the new restrictions on the types of cryptocurrencies listed on exchanges. “Those granting a high level of anonymity and easily used for money laundering will as a general rule be banned.”
The last criterion talks about the strengthening of exchanges internal procedures. “They will need to separate shareholders from management. System development roles will also be separated from asset management roles to keep employees from manipulating the system for their own gain.”
The news outlet describes these five points as the FSA’s “new five-point framework,” that gives the agency the liberty to “perform a detailed assessment and identify potential risks in advance.” These rules will be applied to both existing and new exchanges.
