Japanese authorities are purportedly planning to crack down on crypto exchanges by handing out “administrative punishment notices” to some, while suspending the operations of others.
Nikkei stated that the efforts come as a response after the Financial Services Agency uncovered certain irregularities with the exchanges’ customer protection and anti-money laundering procedures. The regulator’s move was taken a few weeks after the hack on crypto exchange Coincheck.
According to Nikkei reports, several exchanges had faulty procedures, which meant they may give way to money laundering activities or fail to maintain the safety customers’ funds.
Meanwhile, Reuters reported that it is still uncertain what kind of punishment will be meted out or which exchanges are to receive the official notices.
In connection with this, Coincheck is highly likely to receive a notice obligating the exchange to improve their system’s standards. Nikkei also reported that this would be the second instance the cryptocurrency exchange would be ordered to do so.
Over the last few weeks, the FSA has inspected exchanges to evaluate their risk management and cryptocurrency storage methods. The results of these inspections, however, have yet to be made public.
As previously reported on Coinwire, the Japanese regulator investigated both licensed and unlicensed exchanges, telling them to self-report their security protocols. The FSA last month inspected 15 unlicensed exchanges.
The stricter regulation imposed by the FSA against Japan’s cryptocurrency exchanges is a result of Coincheck’s admission to losing an estimated 500 million NEM tokens from its digital wallets.
Coincheck had been operating as an unlicensed crypto exchange prior to the January 26 hack.