Japan’s financial watchdog, Financial Services Agency has already laid out another set of regulatory stipulations for the country’s domestic cryptocurrency exchanges. 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.
Official reports state that the regulator wants to intensify its efforts in order to prevent the infamous January incident. It was none other than the $532 million hack of cryptocurrency exchange called Coincheck, which was by far the biggest single exchange hack in the history of cryptocurrency.
An FSA source told local news outlet Nikkei Asian Review that identifying potential risks in advance has been a challenge for the watchdog. The source reportedly told Nikkei that “without the necessary know-how, we’ve been feeling our way through the dark on how thoroughly we should check these different aspects.”
Cryptocurrency exchanges will now face harsher standards on system management, including not storing currency in internet-connected computers and having numerous passwords for currency standards.
- FSA will introduce a process that will check all Cryptocurrency exchanges for suspicious fluctuations.
- It will also manage client assets separate from those of the exchange and, more importantly, store all crypto holding on an offline system.
- They will also face stricter anti-money-laundering (AML) measures, which demand know your customer (KYC) checks, such as ID verification, and multiple-password protection for large transfers.
- The measures notably also confirm that government-registered exchanges will now face tight restrictions – effectively a ban – on the trading of anonymity-oriented altcoins, such as Dash(DASH) and Monero (XMR).
- The Cryptocurrency exchanges and their internal procedures must be strengthened. They will need to separate shareholders from management.
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