One of Japan’s largest cryptocurrency exchanges has suspended new account registrations due to stricter governmental regulations and internal management problems.
BitFlyer is planning on overhauling its Anti-Money Laundering (AML) and Know Your Customer (KYC) systems in order to deter illicit activities. The upgrades to their internal documentation systems comes after the Japanese government has amped up regulatory pressure on exchanges following the hacks of other major exchanges including Coincheck, CoinRail, and Bithumb.
These attacks damaged the exchange’s fiscal stability but did not ultimately cost customers any funds. All the exchanges reimbursed customers who had coins stolen from their accounts, including Coincheck, who notably covered over $500 million in losses from their NEM breach.
These hacks exposed holes in the security of these exchanges, which led the government to further research the internal practices of the major exchanges in Japan. Local analysts claim that bitFlyer began taking actions to buff their exchanges security and to reform their internal management policies after authorities became aware of a report that the Japanese Yakuza, the country’s biggest crime syndicate, was laundering money through major exchanges in the country.
It was revealed earlier this week that internal improvement orders were sent to several exchanges in the country including bitFlyer. The FSA discussed the results of their inspections, saying:
“Upon inspections, the agency concluded there were flaws in the exchange operators’ internal management systems, such as measures to prevent money laundering. The FSA intends to hand down the improvement orders by the end of this week.”
The government has also been cracking down on the sale and the usage of privacy coins like Monero, Zcash, and Dash.
A Japanese Financial Services Agency spokesperson gave a statement on their crackdown on illicit activities, saying:
“It’s nearly impossible for Japan to handle the problem alone. Even if trade is restricted to only domestic transfers or monitoring is enhanced, it’s still not enough to counter money laundering. It would be best if all the group of 20 industrial and emerging nations and regions (G20) would take the same steps toward prevention.”
Although some media outlets attributed Friday’s market decline to news of bitFlyer’s new account suspensions, it is unlikely that this had any impact on the markets due to the relatively small size of the exchange.