Japan’s regulatory watchdog agency will be denying a registration application for cryptocurrency exchange by a domestic financial trading platform, FSHO.
Federal authorities had earlier approved of 16 other cryptocurrency trading exchanges, but is all set to deny this application from FSHO, for the first time.
The Japan Financial Service Agency (FSA) has accused FSHO of being a trading platform that does not have a proper system for carrying out trading exchanges in cryptocurrencies in a reliable manner, as it lacked the necessary security measures.
FSHO, a trading platform based in Yokohama, had already applied earlier twice, but was given an order to improve its business, being suspended two times and denied permission to conduct crypto exchange activities.
One of the orders for business improvement was given March 8 up to April 7, whereas the other was from the April 8 to June 7. The FSA had stopped the operations of FSHO both times during the process of business improvement.
The improvement was related to KYC procedures and reporting any suspicious trading activities or transactions.
Lack of Improvements
The FSA went in for another inspection of the site on March 23, after an initial suspension on March 8. However, the FSA noted that the corporation had not taken countermeasures for combating money laundering practices or terrorist financing problems.
Thus, the FSA decided to extend the suspension for another two months until June 7. The FSA slapped another order for business improvement on FSHO and asked the company to make drastic changes in its management and comply with the required regulations to operate its business in a regulated and proper manner.
After the second order, the FSA sent a team consisting of lawyers and auditors for creating a fresh management team. The FSA had earlier accused the previous management team of controlling projects without getting the permission of the new team.
The Financial Services Agency in Japan had denied the first application for operating crypto exchanges by the FSHO, as it felt the trading platform to be a substandard operator.
As FSHO is still operating while its application is being reviewed by the FSA, the trading platform is considered a quasi operator or a deemed dealer, making it one among the 16 other deemed dealers.
Of the 16 dealers, eight are planning on withdrawing their applications for cryptocurrency trade. Among other such trading platforms with quasi operating status are Raimu, BitStation and Mr.Exchange, which have planned a withdrawal of their applications as well.
According to the FSA, FSHO did not have the elements necessary for handling such type of cryptocurrency exchanges and so it could not give it the necessary approval.
Denial Expected Again
The second business improvement order came to an end on June 7.
It is expected that the FSA will refuse to give permission for crypto exchange from the trading platform in the future. But it is not known precisely when the next denial order would be issued by the FSA.
Ensuring Sound Trading Atmosphere
From this report, it is noted that the FSA is taking up a tough stance on financial transactions related to crypto exchanges on trading platforms.
This comes on the heels of the Coincheck hacking incident that shook the trading industry earlier in January this year.
At the time, the loss was around $530 million worth of NEM. The FSA then went on to conduct inspections of other such cryptocurrency trading sites and started implementing the regulations and steps in order to protect customers’ assets.
The FSA maintains it is trying to create a sound and strong currency trading atmosphere in the country.