All Cryptocurrency Exchanges in Japan Must Comply With Five New Criteria

The Japanese financial regulator has imposed five new criteria for all cryptocurrency
exchanges operating in the country. These rules apply to existing exchange operators as
well as new ones applying for registration for the first time. On-site inspections will be
conducted on all exchanges prior to approval.
Preventing Coincheck 2.0

The Japanese Financial Services Agency (FSA) has set new rules for the registration of
cryptocurrency exchanges, Nikkei reported on Sunday. The agency aims to promote
compliance and protect customer assets as well as “forestall another digital currency heist like
the Coincheck scandal,” the news outlet added.

Coincheck, one of the largest crypto exchanges in Japan, was hacked in January and lost 58
billion yen (~US$531 million) worth of the cryptocurrency NEM. The exchange has since been
acquired by a leading online brokerage firm, Monex Group.
An FSA official explained to Nikkei that in addition to documentation, the registration process
would now include preliminary visits to ascertain how the exchanges operate. The publication
elaborated:

Exchange operators registering with the government will now need to satisfy five broad criteria.
The Five Criteria
The first of the five criteria concerns system management. The agency will ensure that
exchanges “will not store currency in internet-connected computers and will have to set multiple
passwords for currency transfers,” the publication detailed.
Money laundering preventative measures make up the second criterion. Exchanges “will need
to work harder to prevent money laundering, through such means as verifying customer
identification for large transfers.”

The management of customer assets is the third. The FSA wants to ensure that they are
“carefully managed separately from exchange assets.” According to the news outlet, exchange
operators will be required to check customer account balances multiple times a day for signs of
diversions and “have rules in place to keep their officers from using client money or virtual
currencies.

” There will also be new restrictions on the types of cryptocurrencies listed on
exchanges. Specifically, the publication emphasized. “Those granting a high level of anonymity
and easily used for money laundering will as a general rule be banned.” News.Bitcoin.com
recently reported on rumors that the FSA is pressuring exchanges to delist privacy coins such
as Monero.