Recent reports suggest that the Financial Services Agency (FSA) had conducted inspections of cryptocurrency exchange operators on-site. And the results of the same are now published.
With the motive of receiving an official operating license, FSA has decided to apply intense oversight to the recent exchange applications. The agency has also planned to examine the effectiveness of the newly registered exchanges. And it will also monitor their business models as it will make them undergo on-site inspections at the initial stage. More than one hundred companies, according to the agency, are waiting for their review.
The reports revealed that the rapid growth of transaction volumes is not at par with the exchange operator’s maintenance of their internal control systems. Moreover, this FSA probe’s revelation was one of the causes of the crypto market fall that happened in the year 2017. The total digital assets of domestic exchanges increased to an approximate of six times in the span of one year. The figure sums up to a massive $7.1 billion. The investigators observed that the workforce of the majority of the exchanges was of less than 20 people. It eventually led to the conclusion of one employee managing cryptocurrencies worth $29.7 million.
A detailed document mentions a list of problems across the business models, risk management and compliance, internal audits, and corporate governance of the exchanges. Along with some other concerns, the agency also highlighted that several exchanges had insufficient anti-money laundering (AML) measures. Recently, the FSA said “priority to investor protection” will be given and “substantial” ongoing review of registration procedures will be mandatory. Including tough restrictions on the trading of anonymity-oriented altcoins, the FSA mandated such stipulations for registered exchanges in May 2018.
Financial Services Agency (FSA)
Headquartered in Tokyo, Japan, the Financial Services Agency (FSA) is a Japanese government agency and an integrated financial regulator. It is responsible for overseeing banking, securities, exchange and insurance sectors to maintain the economic stability of Japan. It reports to the Minister of State for Financial Services and the Commissioner operates its functioning. Moreover, the agency also oversees Securities and Exchange Surveillance Commission.