Japan’s Financial Services Agency (FSA), a governing body for financial markets in Japan, has tightened the standards of its due diligence process for cryptocurrency exchanges in the country. The new standards reflect a revision to Japan’s Payment Services Act that was revised in April 2017, which intends to protect cryptocurrency investors from careless and unethical trade practices by exchanges.
As reported by the Japan Times, the FSA has increased the amount of screening questions asked to new exchanges opening in Japan. New exchanges now need to answer 400 questions about its liquidity, operations and expertise. Additionally, applicants must also submit notes from meetings to ensure the financial health and cyber security of its trading platform. The extra questions add to a four-fold increase over the previous process that only involved questions about the founder’s credentials and the platform’s liquidity.
The paper also states: “The upgraded screening process also regularly reviews the composition of an applicant company’s shareholders, while examining if an internal system is in place to check for links to antisocial groups.”
So far, over 100 companies in Japan have expressed interest in registering as cryptocurrency exchange operators. The tightening of regulations, however, could dissuade present and future exchanges from operating within the country’s borders, a source said.
As the news of mounting pressure on Japan’s financial markets broke today, the prices of Bitcoin and other cryptocurrencies also dipped. Bitcoin is now trading 1% lower, down to $7200; while Ethereum dropped 2.5% to $290.