Japan’s top financial regulator, the Financial Services Agency (FSA), issued six new business improvement orders on Friday June 22nd.
The orders to Bitflyer, Tech Bureau, Bitpoint Japan, Btcbox, Bitbank, and Quoine follow the agency’s first rejection of a crypto exchange registration on June 7th.
Bitflyer, Japan’s largest crypto exchange by volume, received an “administrative penalty” order. The agency said that after an inspection, an effective management system has not been established to ensure proper and reliable operation of the business, as well as countermeasures against money laundering and terrorist financing. The exchange is required to submit a written report to the regulator by July 23rd. The regulator elaborated:
Management has not established an internal control system including an internal audit, giving priority to reducing costs.
The other five crypto exchanges received similar orders.
At the moment, Japan has 16 fully-licensed exchanges. Notably, in the past, the only regulated exchanges to receive business improvement orders from the FSA were Tech Bureau, which operates Zaif exchange and GMO Coin. Today’s order is the second Tech Bureau has received.
Bitflyer Temporarily Stops New Registrations
Responding to the FSA’s orders, Bitflyer apologized to its customers and outlined plans to comply with the agency. The company said that in order to promptly build a proper identity management system for existing customers, it has decided to re-check the status of approval. The exchange explained that are looking for defects and deficiencies in customer registration information and may be forced to ask customers to re-implement their confirmation process by asking them to re-submit their identity documents. The firm said that in the meantime it will suspend new registrations. It explained further:
Until reinforcement is in place, we will voluntarily suspend account creation by new customers.
Involvement in Criminal Activity
In an interview with CoinDesk, the FSA confirmed that at least one of the six crypto exchanges that had been suspended, had been found to have some kind of involvement with organized crime groups; particularly the Yakuza.
Without naming the guilty exchange, a FSA spokesperson told reporters that during the inspections, the regulator found that some firms lacked an updated database to screen new registrations. He explained:
We strongly recommend those companies to remove all ties with anti-social forces.
As the crypto industry grows in Japan, the FSA has pointed out the necessity for exchanges to work with the local authorities to create an increasingly secure environment with proper monitoring systems, including screening user identification documents.
The FSA enhanced its inspections on licensed exchanges in Japan following the infamous heist on Coincheck earlier this year, which led to a theft of about $530 million.
The six exchanges will be required to file a written report to the regulator on their progress towards system improvements by July 23rf. The regulator said that if they fail to meet the requirements, they will have to continue filling additional reports by the 10th of every month.
Image Credit: Deposit Photos
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