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The Japanese Financial Services Agency (FSA) is due to impose strict standards on cryptocurrency exchanges seeking to register in the country.
The sudden collapse of Mt. Gox[1], bankruptcy filing, and subsequent accusations levied against former CEO Mark Karpeles of embezzlement and fraud[2] gave cryptocurrency investors a wake-up call: exchanges are not necessarily safe havens.
Since 2014, when the exchange vanished taking millions of dollars' worth of cryptocurrency belonging to investors with it, numerous cryptocurrency trading posts have become victims of cyberattacks, have experienced data breaches, and some exchanges have been nothing more than exit scams which duped investors out of cryptocurrency.
Others have shown every intention of doing right by their investors but poor internal security standards and checks have led to cryptocurrency thefts. One recent case in this category is Coincheck, which suffered a debilitating cyberattack[3] due to poor security standards.
Coincheck, which is based in Tokyo, then faced the ire of the FSA[4] which demanded immediate improvements. The situation also forced Japanese regulators to scrutinize the emergence of cryptocurrency exchanges far more closely.
According to the Japanese publication Nikkei[5], a local FSA official said that a "new perspective" is now needed to prevent such occurrences from happening again.
Documentation only goes so far. Therefore, regulatory oversight, compliance with data protection standards and preliminary visits to organizations to make sure they are not simply schemes designed to dupe investors are all also on the table.
Nikkei reports that cryptocurrency exchanges will need to meet a set of criteria in order to legally operate.
The first is a rulebook of strict standards