Japan’s Financial Services Agency (FSA) has revealed that it will start a full review of bitcoin exchanges operating in the country, which includes putting them under full surveillance starting in October. This step is to ensure they comply with the revised law which legalized bitcoin as a method of payment in April.
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FSA Starts Full Review of Exchanges
Following the revised payment services law that went into effect in April to legalize bitcoin as a payment method, all bitcoin exchanges operating in Japan are required to register with the authorities. The deadline for registration is the end of September.
If the agency finds no problem in the preliminary examination, the exchanges will proceed with the registration process and start a full review to ensure compliance. As part of the process, the FSA will put the exchanges under “full surveillance,” beginning in October, FSA officials reportedly said. The Japan Times described on Sunday:
The FSA will monitor whether the exchanges for bitcoin and other digital currencies have appropriate internal systems, including ones to protect customer assets. If necessary, the agency will carry out on-site inspections.
Last month, the agency established a surveillance team comprising of 30 members, including agency and local finance bureau officials with relevant expertise. “The team is checking whether virtual currency exchanges manage customer assets separately from their own assets and whether they have appropriate risk management measures, including how to respond to cyberattacks, in place,” the news outlet elaborated.
“We will strive to balance the monitoring and development of the rapidly expanding virtual currency market including the response to ICOs (Initial Coin Offerings) which raise funds using the mechanism of virtual currency,” Nikkei quoted the FSA.
Strict Rules Enforced
As bitcoin became a legal method of payment, demand for the digital currency from retail as well as institutional investors has risen steadily. Merchants are increasingly adopting cryptocurrencies and the number of companies entering the bitcoin exchange business has surged. The industry has attracted startups as well as large corporations including SBI Holdings, GMO Internet Group, DMM, Kabi.com Securities and Money Partners Group.
In August, news.Bitcoin.com reported that the FSA had received about 50 applications from companies wanting to start a bitcoin exchange. Some companies have revealed that they have been granted registration, such as the bitcoin exchange Coincheck.
However, as the agency proceeds with the review of registrants, five small companies have withdrawn their applications due to “not meeting the necessary conditions,” NHK reported on Saturday, adding that these companies are exiting the bitcoin exchange business entirely. The FSA is planning to announce the name of the companies that completed the initial registration process at the end of September, Nifty News reported.
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Images courtesy of Shutterstock and Nikkei.
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