Japan’s financial body, the Financial Services Agency, introduces new rules for crypto exchange market to prevent another Coincheck – crypto hack when more than $500 million were stolen – and thus protect client assets.
Not to repeat the mistakes, the Japanese government strives to improve measures in the sphere of crypto exchange regulation.
The Financial Services Agency has released a five-point agenda according to which exchange operators will need to satisfy five criteria.
First of all, they will have to adhere to strict security standards. They include two-factor authentication for cryptocurrency transfers, as well as prohibition on storing crypto assets in web-connected computers.
Secondly, crypto exchange operators will do everything possible to prevent money laundering through Know Your Customer process and verification of the identity of customers.
Thirdly, they will apply best practices to make sure that customer assets are managed separately from corporate exchange assets. They will check client account balances regularly several times per day for any signs of deviation from the norm. The Financial Services Agency also insists that crypto exchange operators should take all possible measures internally to prevent the abuse of customer assets.
Fourthly, restrictions will be imposed on the kinds of cryptocurrencies that grant anonymity, as they are often used for money laundering.
And finally, the Financial Services Agency is calling for transparency of crypto exchange platforms structure and the way they operate. Shareholders should be separated from management teams, as well as asset management roles from those related to development.
The agenda is expected to enter into force when the Financial Services Agency starts accepting applications for registration. The framework will also be applied to existing platforms.