The Japanese financial services Agency (FSA), together with the Japan’s consumer protection Agency and the National police office, has inspected 23 cryptocurrency exchanges, of which 16 are already licensed to operate, and 7 are in the process. Regulators published a report with the results of inspections of local crypto-exchanges.
The report also says that it was Japan where two of the largest cryptocurrency exchange hacks in history took place. First attack (2014) on the stock exchange Mt.Gox resulted in the loss of $450 million. The second hack occurred with the exchange Coincheck in January 2018 and worth $500 million.
The need for this kind of verification is confirmed by the results published by the FSA. Here are the most significant shortcomings the FSA called:
arbitrary price manipulation
75% of the exchanges have less than 20 employees
few executives and employees manage large amounts of user assets
In addition, the report states that a number of exchanges were ordered to establish a system of effective internal control and security management. Other companies, where incorrectly registered sellers were identified, received warning letters.
“Challenge of Japan regulation there’s lack of regulation for ICO. The concept of law in Japan, it is legit to do business written in law, otherwise, it’s sometimes risky to do gray zone business. After MT Gox happened 2014 JFSA made the draft so call “Virtual currency regulation“ April 2016, and start execution from April 2017. At the time JFSA started thinking regulation in 2015 there was not much movement for ICO except Ethereum ICO. So it takes time to Japan government to move to make an action, that makes situation call “Law Lag“ which means regulation cannot catch up fast enough because the movement of technology and business is so fast”.
In conducting such inspection Kazuyoshi MISHIMA sees only the positive side:
“Cooling down ICO market in Japan I think it’s good because there are too many scams ICO recently so by regulating ICO make level up and start allowing only ICO have real products”.
Speaking about the future of the Japanese crypto-exchange market, the expert's opinion is unambiguous:
“I am optimistic for registered virtual exchanges in Japan who will overcome thought investigation by JFSA become real strong entities and organizations”.
It is worth noting that Japan can be called one of the leaders in the cryptocurrency trade. According to the Japan Times, in January this year, the Japanese yen was involved in 56.2% of bitcoin transactions.