Japanese authorities have terminated the operating licenses of two cryptocurrency exchanges, ordering them to halt all kind of trading activities and business. FSHO and BitStation will have their business operations suspended starting from March 8, 2018.
The FSA has also warned seven other exchanges which will soon be reviewed to increase the security features of their platform. The exchanges are also obligated to send to the FSA the newly implemented security measures by March 22, 2018.
The suspension comes after the recent $530 million hack that happened to Tokyo-based exchange Coincheck in January this year. The hackers made off with around 58 billion yen ($543 million) worth of the XEM cryptocurrency, which left 260,000 Coincheck users with a huge gap in their wallets.
The aftermath of this hack and the desire to protect the rights of investors have determined the FSA to raid Coincheck and then started reviewing the security measures of other cryptocurrency exchanges that operate in the country.
The FSA found out in its probing that security systems at Coincheck were faulty and did not have any anti-money laundering measures. Authorities were also suspicious of other exchanges, believing they too could be missing proper security measures to avert such a theft.
This impelled the regulator to look into other security measures taken by the other exchanges. The country’s financial services minister Taro Aso then announced that he had plans of organizing on-site inspections of fifteen virtual currency exchanges that had applied for certification and other authorizations with regulatory authorities, reported The Japan Times.
The Coincheck hack is the world’s biggest hack in the world of cryptocurrencies. The exchange later made an announcement stating that it would refund $400 million to its 226,000 customers who lost their funds in the hack.
FSA allegedly caught a senior employee at BitStation exchange using customers’ bitcoin for his own purposes. BitStation is just one of the other 15 exchanges that are being reviewed. The authorities imposed the one-month ban on the exchange’s operations imposed shortly after this fraud was found out in the probe.
The exchange had been allowed to carry out their trading operations on a provisional basis prior to this suspension. Bitstation has dropped filing to become an authorized exchange following this news. The FSA also noted that FSHO, the other exchange to have the one-month ban, did not have a suitable system to supervise trading activities.
A group of sixteen cryptocurrency exchanges which have been approved by the government decided to establish a self-regulatory organization after Coincheck’s hack. Since September 2017, the FSA started issuing licenses to cryptocurrency exchanges.
Japan currently accounts for over thirty percent of all global transactions, and has been aiming to become the world’s cryptocurrency capital. In April 2017 the government declared that bitcoin was officially accepted as a legal tender.
The crypto market sector in Japan had been influenced by the increasing regulatory actions and scrutiny of cryptocurrencies that have taken place in South Korea.