Japan Shuts Down Two Cryptocurrency Exchanges But It May Be Good News For The Industry

Japan Shuts Down Two Cryptocurrency Exchanges But It May Be Good News For The Industry

Japan Shuts Down Two Cryptocurrency Exchanges But It May Be Good News For The Industry

Japan’s Financial Services Agency (FSA) shut down two cryptocurrency exchanges today (March 8), ordering them to suspend operations for a month, as part of a crackdown following the $534 million hack of Coincheck in February.

On the same day, the FSA also issued business improvement orders to five other exchanges, including Coincheck (again), which had already been slapped with a business improvement order in January. This is the first time the FSA has ordered a cryptocurrency exchange to stop operations.

Japan Shuts Down Two Cryptocurrency Exchanges But It May Be Good News For The Industry
Japan Shuts Down Two Cryptocurrency Exchanges But It May Be Good News For The Industry

Crackdown

The FSA confirmed that it had ordered two cryptocurrency exchanges, FSHO (Yokohama City) and Bit Station (Nagoya Prefecture), to temporarily halt their operations for a 30-day period starting from March 8.

I attempted to contact both exchanges and Coincheck for comment but hadn’t received a response at the time of publishing.

The FSA noted that FSHO had failed to put in an effective and appropriate system to monitor trading and had not given required training to its employees. Bit Station was suspended after a senior employee allegedly diverted digital currency deposits for his own personal use, showing a serious lack of cybersecurity.

Japan has been hoping to become the cryptocurrency capital of Asia, and perhaps the world. More than 30% of all global bitcoin transactions are conducted in yen, and in April of 2017, the government made Bitcoin legal tender.
It was that fiasco which resulted in Japan eventually issuing new regulations last year, requiring exchanges to obtain the equivalent of a license from the FSA. However, Coincheck – as well as many other exchanges who had been operating before new regulations were introduced — was allowed to continue operating while the agency reviewed their applications.

Thousands of businesses in Japan accept bitcoin, although other alternative currencies have struggled to gain widespread acceptance. bitFlyer, which is now Japan’s main bitcoin exchange, claims more than a million users at present.

The Plus Side Of The Crackdown

The FSA crackdown, while it may spook some aficionados of cryptocurrency, can also be taken as a sign that Japan is hoping to build an environment in which customers feels safe in entrusting their money and virtual money with the exchanges.

J.Maurice, a cryptocurrency expert, specializing in Bitcoin, and the representative director of WIZ K.K. (Tokyo), welcomed the crackdown by the FSA. “We are considering applying for a cryptocurrency exchange license this year so we are following this news with great interest. There was a time when Mark Karpeles, the CEO of Mt.Gox, approached the FSA for advice and they told him to do as he wished since bitcoins were unregulated. Now they [the FSA] are taking steps to make sure that cryptocurrency users are protected.”

He added, “The general public doesn’t buy or sell depending on their confidence in the FSA, but they might choose which exchange to use depending on what the FSA says or does. Would you trust your money to an exchange that the FSA just slapped with a business improvement order?”

He says he’s convinced the steps taken today are ultimately a good thing for Japan’s customers of cryptocurrency exchanges and the cryptocurrency business in general.

Source: Forbes