As per the sources, on-site inspection on several cryptocurrency trading exchange operators was awaiting execution by Japan’s financial regulator and it was expected to expand surveillance to many others. The local media reported that the Financial Services Agency (FSA) has concluded that cryptocurrency exchanges might be vulnerable to cyber attacks. Hence, (FSA) will target several operators for imminent on-site inspections.
15 Unlicensed Japanese Cryptocurrency Exchanges Under Surveillance.
Recently, Japanese government stated that in light of a major hack that took place lately, 15 unlicensed cryptocurrency exchanges will be under surveillance too. According to Taro Aso, the financial services minister, the exchange providers that have applied for licenses, but haven’t been approved yet, will go through on-site inspections.
In late January, Coincheck exchange lost NEM tokens worth $533 million in a major security breach. Therefore, the financial services minister, stressing on in-depth investigations, has indicated that surveillance will help scrutinize the technical safety procedures used in exchanges along with management of user funds.
After the country amended its payments laws in April 2017, recognizing cryptocurrencies as a legal payment method, The Japanese system for licensing exchanges came about. Therefore, Japan’s financial watchdog, FSA (Financial Services Agency), ordered all the licensed and unlicensed exchanges around the country to report on their security protocols and resistance to hacking, in response to the Coincheck theft. But later, FSA decided to have on-site inspections, which are very much required for unlicensed operators after appraising their reports.
Although, Coincheck has not been approved by the Financial Services Agency, but it is allowed to continue its operations, while its review process is still underway. According to some sources, the authority ordered the exchange to launch an investigation into its security vulnerabilities that led to the hack. They also required Coincheck to submit a report for management improvement to the authority. In a statement, FSA mentioned that inappropriate management of system risks had become a standard at Coincheck.
FSA has also warned a foreign cryptocurrency service provider, as it has been found offering unlicensed financial instruments. Since the country legalised Bitcoin as a payment method, this is the first time FSA has issued a warning over a cryptocurrency service provider.