In 2016, Coinbase, one of the largest wallets and cryptocurrency exchanges in the US, shared their plans to enter the Japanese crypto market. Even though Japan is rather progressive toward crypto, as it was one of the first countries to officially recognize Bitcoin, entering the crypto market is no easy task.
In April 2017, since the amendment of Japan’s Payment Services Act, all crypto exchanges are required to register with the Financial Services Agency (FSA). The FSA has a right grip on local exchanges, reacting to security breaches after two Japanese crypto exchange scandals. On May 6, the FSA rolled out further regulatory stipulations for domestic crypto exchanges, reportedly intensifying its efforts to prevent another major hack.
Now, a senior executive of Coinbase has said he is confident that the company will receive an operating license in Japan and they are committed to getting it done by 2019. Coinbase had announced their plan to enter the Japanese crypto market in 2016, and appointed Nao Kitazawa as the CEO.
Mike Lempres, CPO at Coinbase said that security is currently the top concern at the FSA. The FSA has not issued any crypto exchange licenses so far, even though they have reviewed 16 applications. Over 160 companies are planning to apply for exchange licenses. He also said that it is good for them that the Japanese government is more focused on security, since the exchange stores 99 percent of its funds offline in cold wallets that are not connected to the internet, making a significant cyber-attack less likely.
Nonetheless, Lempres pointed to a key question still to be resolved in its application, namely whether the FSA will require Coinbase’s system to be operated in Japan. Lempres said that such a condition would significantly raise security risks, stating:
“We have everything built to protect our storage… in the U.S. We won’t do anything to even raise the possibility of a hack. It would be hard for us to duplicate what we do in the U.S. today in Japan and other countries.”
Lempres noted that the exchange currently has dozens of U.S.-based employees dedicated to security.