Japan’s Financial Services Agency has come up with a new set of standards and requirements for crypto exchanges that register with it. According to the agency, the new rules are meant to promote compliance and protect customers from a heist such as the one that happened to Coincheck; which dominated the headlines early this year.
We need to introduce a new perspective in reviews of registrations,
– An official from the FSA said in a meeting this April.
The registration process will go beyond mere documentation and include preliminary visits that make detailed investigations into how operations are managed.
Since the government recognized Bitcoin and other cryptocurrencies as valid forms of payment in April 2017, there have been numerous efforts to nurture the ever-changing industry. However, the government has been keen on enhancing compliance and protection of customer assets of late.
Five Tough Measures for New Exchange Operators
The new set of regulations require new exchanges that seek to be registered and licensed to operate in Japan to satisfy five broad areas. Firstly, exchanges will be subjected to tougher standards on system management. They will not store currency on Internet-connected computers and will have to set multiple passwords for currency transfers.
The second area of the new regulations requires the exchanges to prevent money laundering by ensuring that customer details are verified for large transfers.
To protect the customer assets, exchanges will be required to manage their assets separately from those of the exchanges. Exchanges will also be required to keep on checking the customer account balances several times every day to look for any diversion signs. The exchanges are also required to set strict rules for their staff, barring them from using customers’ money or coins for trading or any other operation, without the customer’s consent.
Fourthly, there will also be new restrictions on the kinds of cryptocurrencies allowed at government-registered exchange operators. Those granting a high level of anonymity, making them easily prone to money laundering, will be banned.
Finally, exchanges are required to have strong and stricter internal regulations. Shareholders and the management must be separated. Operators will also have to separate system development from asset management to prevent staff from potentially manipulating the system for their own benefit.
A source from the FSA told Nikkei,
Without the necessary know-how, we’ve been feeling our way through the dark on how thoroughly we should check these different aspects,
The new five-point guideline will allow the agency to conduct a thorough assessment and identify potential risks in advance.
Cointelegraph says that The FSA will send inspectors to both new and existing operators to check compliance with the new measures.
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Do you think the new measures will protect customers from the theft of their assets? Let us know in the comments section.