Japan regulators unveiled stricter rules and regulations regarding cryptocurrency exchanges. It was an effort to avoid another theft like the one that ensued Coincheck way back in January. It was based on the Nikkei Asian Review.
Japan’s Financial Services Agency hopes to start with the use of a latest and stricter framework designed for registered cryptocurrency exchanges this summer. The agency will also advise those who fail to come up with its new rules to discontinue operations. All of the new and current operators are highly required to meet the new standards.
The government has changed its goal to support consumer protection measures after primarily identifying virtual currencies as a legal form of payment having the interest of supporting the continuous innovation of technology.
The latter agency explained last April that the latest procedures are necessary for the registrations of the cryptocurrency exchange which extend beyond simple documentation to contain onside investigations on how the operations will be managed.
New requirements are established for the cryptocurrency industry. As a result, the cryptocurrency exchanges will now face harsher standards when it comes to system management such as not storing currency in internet-connected computers and using several passwords for currency standards.
This time, exchanges will have a big part to avoid money laundering through verification of the identification of the customer for major transfers. Keeping customer assets separated from exchange assets, the exchanges will have to check the account balances of the customer several times per day for signs of diversions.
Furthermore, exchanges are also mandated to have rules in place to avoid their officers from using the funds of their clients. New rules are also implemented about the types of cryptocurrencies used to register exchanges. Stricter internal rules like measures on separating management from shareholders were also established.
The system development roles must also be separated from those of asset management. In return, the employees can never manipulate the system for their own sake.
The operators will pass documents for the registration of exchanges with the FSA. Aside from a review of these documents, the agency will also allow inspectors to visit exchanges which pass through the initial screening to monitor their operations and check the number of employees.
According to an unnamed source from the agency, “By not having a sufficient expertise with the exchanges, the agency has been feeling our way through the dim on how thoroughly we need to check these different aspects.