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Japan’s financial regulator, The Financial Services Agency (FSA), has raided two cryptocurrency exchanges last week due to concerns over internal business conduct, sources close to the matter told Reuters. The FSA inspected Fisco Cryptocurrency Exchange Inc and Huobi Japan Inc. Both companies recently underwent significant changes to their management structure, encouraging the FSA to investigate concerns over customer protection and anti-money laundering.
Huobi is a Singapore-based cryptocurrency exchange that has offices in South Korea, Hong Kong, and Japan. In September 2018 the Huobi Group announced their expansion into Japan as part of an acquisition deal with local licensed cryptocurrency exchange called BitTrade. Huobi has big plans for its expansion into Japan, saying:
“Leveraging on BitTrade’s leadership team and its Japanese government-approved license, this is just the beginning as we look to grow BitTrade into the most dominant player in the Japanese cryptocurrency market.”
At the time Huobi acquired BitTrade, BitTrade was one of 16 licensed cryptocurrency exchanges in Japan; this number has since increased but Japan is still somewhat conservative about licensing such crypto exchanges.
In March 2019 former head of the Wirex partnership department and licensing process expert, Kevin Newman said:
“Despite the fact that the FSA is supposedly awaiting consideration of 150–200 applications, it is considered that only 20 potential applicants are viable in the sight regulator. Basically, those who have the resources to finance another 18-24 month licensing process, if AFS decides to get permission for drip feeding. Coinbase can be a good example of such a sufficiently authoritative legal entity at the global level. The key question is how many non-Japanese exchanges will be licensed. It will be interesting to see.”
Fisco is a financial services provider in Japan. Prior to 2016, its focus was on equity, foreign exchange, bonds, and commodities. In 2016, Fisco began its journey into the crypto exchange industry by launching a cryptocurrency exchange and in 2018 it has acquired Zaif Exchange, a government registered cryptocurrency exchange.
Japan is arguably the world’s most progressive country in the world when it comes to favorable cryptocurrency regulation. Japan wants to see the growth of cryptocurrency and blockchain technology that crypto is based on, but also wants to implement fair and appropriate regulation in the industry. In 2017 Japan became the first country to regulate cryptocurrency exchanges. Exchanges within the country now have to register with the FSA and are required to submit reports to the government.
The aim of cryptocurrency regulation should be to stimulate growth and innovation in conjunction with protecting consumers. In recent years the FSA has stepped up its surveillance of cryptocurrency exchanges within the country after a number of high profile hacking attacks on Japanese and global exchanges.