Japan’s top financial regulation firm the Financial Services Agency (FSA) has been hard at work, instilling new regulations and compliance requirements across all cryptocurrency exchanges in the region, following a massive hack of the Coincheck exchange at the start of 2018 that saw over $500M in NEM stolen in what is being called the biggest hack in the history of cryptocurrency.
After issuing a warning to Binance – the world’s largest cryptocurrency exchange by volume – and forcing them to consider moving operations to the island nation of Malta, other Japan-based exchanges began closing up shop rather than bolstering operations and security to meet compliance requirements set by the FSA.
Two other Japanese exchanges, Eternal Link and FSHO have had their operations and services suspended, effective immediately, until the first week of June, due to administrative penalty orders issued by the FSA for failing to fully comply with standard know-your-customer procedures. The FSA says that failure to comply with anti-money laundering efforts goes against the Act on Prevention of Transfer of Criminal Proceeds.
The FSA also penalized Eternal Link for violating Japanese laws against using customer deposits to pay for company-incurred expenses, albeit temporarily.
A third exchange, Last Roots, was also found to have not made enough of an attempt to meet internal safety and security standards, yet was not suspended for the citation.
The news comes just a week after Tokyo GateWay and Mr. Exchange withdrew their license applications with the FSA to become registered exchanges. The FSA is not making it easy for cryptocurrency exchanges, which is part of the motivation for Yahoo Japan's plan to acquire already licensed exchange BitARG, bypassing the need to file for a license of their own. Similarly, Monex has made an offer to acquire the struggling Coincheck despite ongoing issues lingering in the wake of the hack.