The Japanese Financial Services Agency (FSA) has set new rules for the registration of cryptocurrency exchanges, Nikkei reported on Sunday. The agency aims to promote compliance and protect customer assets as well as “forestall another digital currency heist like the Coincheck scandal,” the news outlet added.
The Five Criteria
1 System Management
Crypto exchanges “will not store currency in internet-connected computers and will have to set multiple passwords for currency transfers.”
2 Money Laundering Prevention
Exchanges “will need to work harder to prevent money laundering, through such means as verifying customer identification for large transfers.”
3 Customer Asset Management
Exchange operators need to keep customer assets completely separate from exchange assets. Officers of the exchange will not be allowed to use customer funds and customer account balances will need to be checked multiple times per day for any signs of misuse.
4 Types of Crypto to be Listed
“Those granting a high level of anonymity and easily used for money laundering will as a general rule be banned.”
Monero is specifically being targeted right now by the FSA for removal from Japanese exchanges.
5 Internal Procedures
They “will need to separate shareholders from management. System development roles will also be separated from asset management roles to keep employees from manipulating the system for their own gain.”
The five criteria make up the FSA’s “new five-point framework,” allowing the agency to “perform a detailed assessment and identify potential risks in advance,” the news outlet described. The new rules will apply to existing exchanges as well as new ones entering the market. Those that cannot comply with these five rules are encouraged to exit the business.
According to Nikkei, the FSA is likely to start accepting new registration applications for exchanges in the summer. The agency recently revealed that there are approximately 100 companies interested in applying for registration. The news outlet elaborated:
The FSA will first review documents submitted by operators seeking government registration. It will then send inspectors to those that pass the initial screening to review their system operations and verify the number of employees.