More on Forbes: An ICO Ban In Japan Is Still A 'Definite Possibility'īecause regulations take up to two years to legislate, the FSA is to authorize in July the newly established Japan Cryptocurrency Exchange Business Association of 16 member licensed exchanges to set the rules that the existing rulebook does not address yet, such as initial coin offerings, security procedures like Anti-Money Laundering (AML) and Know Your Customer (KYC), and market manipulation, says Konno, whose exchange is a member. “There is a big difference between the existing institution and the act itself.” The law itself does not ban ICOs because the cryptocurrency law was passed last April before ICOs became popular, but the government has made its stance against them clear. Japanese regulators are more conservative and making efforts to speak with centralized exchanges about cryptocurrency issues, says Alex Shin, partner at Seoul-based blockchain accelerator Hashed, which is exploring the Tokyo market.īut licensed exchanges are banned from adding new coins, and "we cannot have any discussion about the ICO business in Japan,” adds Konno. The FSA has been focusing on reviewing the existing exchanges, reportedly including physical visits to the exchange offices. Coincheck resumed operations and refunded $430 million to its hacked users in mid-March. Regulators also began cracking down on scam and illegal foreign ICOs selling to the Japanese public, including out chasing out Macau-based Blockchain Lab in February and reportedly Binance in March, which the CEO refutes. (Photo Illustration by Chesnot/Getty Images) In this photo illustration, Bitcoin course's graph is seen on the Coincheck cryptocurrency exchange. One reason Coincheck was the target of a hack, Higashi notes, is that its wide offerings of non-mainstream altcoins, each with their respective characteristics and specifications, bring security risks of their own as it’s difficult to secure every framework. They ensured that exchanges were managing customers’ funds with basic security measures, criticizing a handful of exchanges including Coincheck for poor internal controls. “But due to the Coincheck hacking, the FSA turned the strategy from growth to monitoring.”Īfter the hack, the FSA were focused on two things: investigating exchanges to prevent another hack and cracking down on scams and illegal ICOs. The Japanese government had wanted to promote fast growth of the cryptocurrency business, becoming first movers in regulation, says Katsuya Konno, chief financial officer of Japanese exchange operator Quoine. More on Forbes: How The $500 Million Coincheck Hack Exposes Deeper Security Flaws In Corporate Japan Only then were regulators forced to face the music, as the issue became highly publicized in local and foreign media. 26, the Coincheck hack: The exchange’s users lost $530 million worth of NEM tokens in the second largest crypto heist in Japan after Mt.Gox in 2014. “It’s not that Japan is an ICO haven, but there is no enforcement, and we will see massive issues in the future," Higashi says. But that’s mostly because they were toeing a gray line, Higashi says. Japanese regulators appeared either positive or neutral about cryptocurrency, giving the country a default reputation as a haven compared to hardline countries like China. Coincheck, which marketed itself as being user-friendly and convenient for impatient beginners, had been managing users’ funds on a hot wallet -an online crypto account that transfers funds faster-rather than a more secure cold wallet, which is stored offline like a vault and much harder to hack. On top of that, he adds, exchanges have prioritized convenience over security to win over users. More on Forbes: Japan's Financial Regulator Is Pushing Crypto Exchanges To Drop 'Altcoins' Favored By Criminals
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