- Japan’s FSA warned five unregistered crypto exchanges for regulatory violations.
- Exchanges must be licensed and follow strict rules since 2020.
- Unregistered platforms leave users unprotected in case of disputes or hacks.
The Japanese Financial Services Agency (FSA) has issued formal warnings against five unregistered overseas online cryptocurrency exchanges on accusations of offering investments without authorization and thereby being in violation of Japanese regulatory requirements. According to a report published by CoinPost, exchanges whose names have come to light since the warning issued by Japanese authorities include KuCoin, Bit Castle LLC, Bybit Fintech Limited, MEXC Global, and Bitget Limited.
Japan has been a world leader in terms of cryptocurrency regulation, having enacted its first comprehensive set of digital asset legislation back in 2017. These immediately responded to the infamous collapse of Mt. Gox, the Tokyo-based exchange that once dominated Bitcoin trading. Mt. Gox’s bankruptcy in 2014, following a catastrophic hack that resulted in the loss of 850,000 Bitcoins, sent shockwaves throughout the global crypto ecosystem.
In 2020, the FSA further tightened the noose by making it binding for all cryptocurrency exchanges operating in Japan to obtain an official operational license. Under the Payment Services Act and the Financial Instruments and Exchange Act, service providers are obliged to implement effective AML/CFT policies. Moreover, the platforms should be sound in safekeeping users’ funds and keeping proper records of transactions.
Japan Cracks Down on Unregistered Exchanges
By sending a warning to the five exchanges, the FSA has identified major risks for Japanese users who interact with the various platforms. Because the exchanges are unregistered, customers who use their services cannot legally avail themselves of Japanese law protections. In disputes, hacks, or insolvencies, affected users could face extreme difficulties in retrieving their funds or taking any action through Japanese authorities.
This is not the first time some of these exchanges have been on the FSA’s radar. Indeed, all three platforms-Bybit, MEXC Global, and Bitget Limited-have received prior warnings from the FSA. In April 2022, the agency had told these three and BitForex to stop operating in Japan. Bybit has faced repeated scrutiny, getting warnings in 2021 as well.
The latest move from the FSA underlines a wider challenge that has come up before regulators worldwide in a borderless digital economy: how to enforce the rules of jurisdiction. While crypto adoption is growing and becoming more mainstream, the activities of unregistered platforms serving users in multiple countries have become increasingly difficult for a regulator to curtail.
Japan Tightens Crypto Oversight
Japan’s proactive stance in trying to safeguard its citizens is bound to set a good example to other countries facing similar challenges. However, the fact that large platforms such as those listed continue unauthorized operations indicates that full compliance in the crypto space remains an uphill battle.
The warnings issued by the FSA could mean increased scrutiny of such exchanges and possible sanctions in case they continue operating without authorization. To users, the message is pretty clear: one risks a lot when dealing with unregistered exchanges, which include a lack of protection in courts of law.
The FSA’s move serves as a grim reminder that transparency, accountability, and regulatory compliance are paramount in this rapidly changing world of cryptocurrency. As Japan remains at the forefront of crypto oversight, this regulatory saga will be viewed under a microscope from many corners of the world.
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