Japan Crypto Exchange Landscape
It has been rather quiet on the Japan crypto — or virtual currency — exchange front, as all the operators are working through their business improvement orders, and the landscape of licensed exchanges has remained unchanged since almost a year ago. However, in terms of merger & acquisitions activity, and the overall regulatory environment, lots has happened, so let us recap.
Mergers & Acquisitions
- The only true merger in this market was the rescue of the hacked Zaif exchange through FISCO, announced on October 12, 2018, arguably taking one operator out of the market
- Previously, in April 2018, Monex had acquired Coincheck, which at the time of the hack was a “deemed virtual currency exchanger”, i.e. it was not yet fully licensed, but allowed to continue operations since it was active before the legislation was put in place on April 1, 2017
- Also in early April 2018, Yahoo, through its venture arm Z Corporation, acquired a minority stake in Bit Arg Exchange
- At the end of August 2018, Rakuten acquired Minna no Bitcoin (Everybody’s Bitcoin), which was equally a “deemed virtual currency exchanger” — this was seen as the exchange not being able to cope with the raised regulatory bar by itself, and looking for an exit via sale
- In September 2018, global crypto exchange powerhouse Huobi announced its acquisition of Bit Trade
Self-Regulatory Organization
As we have covered in our article “How many blockchain organizations do you need?”, the Japan Financial Services Agency (FSA) had “nudged” the industry towards a single self-regulatory organization.
Now that the Japan Virtual Currency Exchange Association (JVCEA) has been authorized as a self-regulatory organization, and is thus empowered to set operating rules, industry sources are telling us that a draft proposal circulating for new token listings includes a sixty point questionnaire to be completed by the project, which an exchange would sponsor, the JVCEA would approve and pass on for final judgement to the FSA.
The whole process is expected to take at least two months if issued on the basis of an existing protocol, e.g. a new Stellar-based token, and could extend if a new protocol is involved. Key judgement criteria include the following:
- No privacy token
- Fairness of issuance scheme
- Security of the network (e.g., defense against a 51% attack)
As stated above, all is in draft form currently, but there is room for optimism that Japanese crypto exchanges could see new listings during the first quarter of 2019.
Financial Services Agency
With the wave of regulatory inspections post the Coincheck hack completed, business improvement orders issued, and remediation by the exchange operators well under way, the FSA is facing a backlog of more than 150 applications.
At the end of October, the FSA has published a new, 83-page application form for aspiring crypto exchange operators (we also provide a machine-translated English version).
Credits: Taiki Asakawa kindly provided input to this article and reviewed for factual correctness.
Please also see our previous coverage of the Japan crypto exchange landscape:
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