Details of FSA crypto exchange sanctions

Detailed analysis of Japan FSA virtual currency exchange sanctions handed out on June 22, 2018

The Japan Financial Services Agency (FSA) handed out business improvment orders to five virtual currency exchange operators on Friday, June 22, 2018, in the most significant action taken to date as it included industry heavy weights BitFlyer and QUOINE, in addition to Bit Bank Corporation, Bit Point Japan and BTC Box.

For each exchange operator, the FSA demanded action on a number of points, which varied in scope by exchange. Formal business improvements must be presented to the FSA no later than July 23, 2018, and until the time that the business improvement plan has been fully enacted, a monthly report must be submitted by the tenth of each month detailing the previous month’s progress and implementation status.

Let us review some of the major statements made in the business improvements orders:

• bitflyer stands out as the only exchange that just has to conduct “an intense review of the management system”, understood to be fundamental policies & procedures, i.e. the definition of how you intend to run and govern the organization, while the other four need to establish these in the first place
• All exchanges need to establish systems for anti-money laundering (AML) and combating terrorism financing; bitflyer have announced that they will re-validate all accounts, and have suspended new customer onboarding for the time being
• Bit Bank stands out as the only exchange that provides sufficient segregation of customer assets and good record keeping; Bit Point’s improvement point is focused on customer assets only, while the other three need to implement both
• However, Bit Bank gets called out for a specific focus on improvements in their white label strategy and outsourcing, which are somewhat unique to their business model
• Lastly, it is noteworthy that all exchange operators get written up for the implementation of new virtual currency listings — this provides an indication that the FSA-sanctioned launch of ICOs, and even of additional existing crypto currencies on the leading exchanges is some way off.

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