Japan FSA Releases Results of On Site Inspections of Crypto Exchange Operators in Country

The Financial Services Agency (FSA) has released the results of its on-site inspections of cryptocurrency exchange operators in Japan.

This was reported by Cointelegraph Japan.

Based on its investigation, the watchdog has ruled that it would apply more stringent oversight into new applications from exchanges that are hoping to receive an operating license. Newly registered exchanges would be mandated to go through on-site inspections at an early stage and the agency seeks to thoroughly investigate the efficiency of their business models.

According to the agency, there are at the moment “hundreds” of firms that are waiting on their review.

The FSA inquiry uncovered that exchange operators’ upkeep of their internal control systems has not kept pace with the quick growth of transaction volumes, which it partly credited to the “renaissance” of the crypto markets in the fall of 2017.

According to the analyses, the total digital assets of domestic exchanges increased to 792.8 billion yen ($7.1 billion), an over six-fold increase within a year. Meanwhile, most exchanges’ workforces are less than 20 people, which basically meant that one employee on average was found to be managing digital assets worth 3.3 billion yen ($29.7 million).

The all-inclusive document recognized numerous problems across exchanges’ business models, risk management and compliance, internal audits, and corporate governance. The agency emphasized concerns over insufficient anti-money laundering (AML) protocols in particular exchanges.

Local news outlet Nikkei has reported that it is likely the new registration of exchange operators — which had all but stopped after January’s $532 million hack of Coincheck — would commence once again after the FSA’s interim publication.

The FSA has indicated that “substantial” review of registration protocols would be essential, and that it would continue to give “priority to investor protection.”