The Financial Services Agency of Japan is preparing to embark on reviewing a backlog of applications for different companies interested in running cryptocurrency exchanges in the country.
This announcement comes after several months of stay since the FSA put on hold the reviewing of applications in January this year. This happened after the Coincheck hack that happened in January. The hold came on to allow FSA to do on-site inspections at the licensed and “quasi” exchanges.
Since the hack at Coincheck, FSA has tightened regulations in relation to ICOs and cryptocurrency exchanges although it ruled out excessive regulation claiming that they want the industry to grow. They have prepared a new application process, including a 400-item questionnaire, face-to-face interviews and the submission of meeting minutes. However, media analysts say that the new more demanding application process may discourage applicants.
The agency also created a special unit to deal with cryptocurrencies and money laundering-related issues. It said last week that it will hire 12 more employees to deal with crypto-related matters. Cryptocurrency exchanges in the country host more than 3.5 million active cryptocurrency traders from Japan and they all manage around $97 billion worth of Bitcoin transactions as per 2017 data according to FSA. Bitcoin and cryptocurrency is legal in the country, but exchanges require meeting certain regulations including registering with and earning a license from FSA, whether they are domestic or international.
Just this month, FSA introduced new screening requirements for cryptocurrency exchanges seeking to operate in the country. The new requirements focus beyond the registrants’ financial health and system safety measures. They will now be accessing companies’ decision-making process and their links to antisocial groups. They increased the number of question items in the screening applications to about 400 items, and while the previous assessment focused on things such as applicant’s financial status and measures to ensure system safety, the new assessment will add checks to determine if the exchange is properly conducting risk management.
It also announced that it would issue regulations for Japanese companies that want to issue initial coin offerings (ICOs).
Currently, the number of cryptocurrency exchanges in the country are around 160. FSA gave licenses to 11 companies in September last year and then 5 more in the following months. The 16 so-called “quasi” exchanges that had been operation were also allowed to continue trading provided they would apply for FSA licenses. It even rejected an application for a cryptocurrency license in June for the first time ever.
Those applications pending review include from companies such as Yahoo and South Korean-owned chat app service Line. Others include eCommerce platform Rakuten and Mitsubishi UFJ Financial Group, one of the world’s top five biggest banks.