Japan’s FSA upgrades screening process for cryptocurrency exchanges - Report

Japan’s Financial Services Agency (FSA) has introduced a stricter screening process for companies seeking to become registered cryptocurrency exchanges, according to Japan Times.

The agency ramped up its oversight of cryptocurrency exchanges following the major hack suffered by Coincheck cryptocurrency exchange earlier this year. Sources familiar with the matter told the news source that the tighter screening process is aimed at checking if these platforms are properly conducting risk management.

Earlier in its screenings, the regulator sought responses from applicants on their financial status and measures to ensure the safety of their systems. It also conducted on-site inspections to verify the answers.

The FSA has now reportedly raised the number of questions in the screening process by four times to about 400 items, sources said. Among other things, applicants would now also be required to submit minutes of board meetings. The agency aims to check whether company executives are actively discussing the measures to sustain the company’s financial health and ensure its system’s safety.

In addition, the FSA will also regularly review the composition of shareholders of an applicant company, while checking if it has an internal system to check for links to antisocial groups, the sources said.

The FSA has licensed 16 cryptocurrency exchanges till date and allowed 16 more companies to continue their operations while it reviewed their applications, Bitcoin.com reported. Thirteen of these 16 “quasi-operators”, except Coincheck, Lastroots, and Everybody’s Bitcoin, have withdrawn their applications.

Recently, the FSA told Bitcoin.com that 160 cryptocurrency exchanges were seeking to enter the Japanese market.