Recently, six fully licensed Japanese cryptocurrency exchanges responded to business improvement orders issued by the country's top financial regulator. Two executives resigned from their positions as vice presidents of the Japan Virtual Currency Exchange Association (JVCEA).
Background of the Regulatory Action
On June 22, Japan's Financial Services Agency (FSA) issued improvement orders to six regulated cryptocurrency exchanges. Currently, there are 16 licensed exchanges operating in Japan. The six exchanges receiving orders were:
- Bitpoint
- Bitpoint Japan
- Btcbox
- Bitbank
- Quoine
- Tech Bureau (which received two separate orders)
The JVCEA was established in March of this year, composed exclusively of the 16 government-approved cryptocurrency exchanges. Its formation came in response to increasing security concerns following several high-profile hacking incidents, aiming to restore public confidence in the industry.
Leadership Changes in JVCEA
The association's leadership structure includes:
- Chairman: Taizen Okuyama
Directors:
- Yuzo Kano (Bitflyer)
- Hiroyuki Noriyuki (Bitbank)
- Yoshitaka Kitao (SBI Virtual Currency)
- Tomitaka Ishimura (GMO Coin)
On Monday, June 25, two vice presidents submitted their resignations, with the association releasing the following statement:
"Following the receipt of business improvement orders for their cryptocurrency exchange businesses, we have accepted the resignation requests from representatives Yuzo Kano of Bitflyer and Hiroyuki Noriyuki of Bitbank."
The association emphasized its commitment to protecting user interests and promoting healthy industry development through voluntary regulations.
Exchange Responses and Compliance Plans
Bitflyer
Japan's largest exchange by trading volume announced comprehensive improvement plans across multiple business areas. It temporarily suspended new user registrations while strengthening account verification processes for existing users.
Bitbank
The exchange stated it was reviewing its "internal control systems and management systems" to restore customer trust while ensuring normal business operations. It assured users that:
"These improvements will not affect existing services or user assets. All transaction services including JPY deposits and withdrawals remain fully operational."
Bitpoint Japan
The exchange offered sincere apologies for any inconvenience caused and promised immediate enhancements to its regulatory control systems.
Btcbox
The exchange committed to thoughtful, careful action in establishing new management systems as required by the FSA.
Quoine
CEO Mike Kayamori detailed compliance plans, noting the orders focused on:
- Governance
- Compliance
- Back-office operations
- KYC/AML procedures
He expressed confidence that the required improvements could be completed within one to two months.
Tech Bureau (Zaif)
Referencing an earlier March order, the operator of Zaif exchange acknowledged needing improvements in:
- Effective risk management systems
- Appropriate customer response systems
The exchange wrote:
"We sincerely accept this latest improvement order. For our customers' peace of mind, we will further strengthen and improve our organization through company-wide efforts to establish proper management systems."
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Industry Impact and Future Outlook
This regulatory action demonstrates Japan's commitment to maintaining strict oversight of its cryptocurrency market while allowing room for industry self-regulation through organizations like JVCEA. The exchanges' prompt responses suggest recognition of the need for stronger compliance measures to ensure long-term market stability.
The cryptocurrency sector in Japan continues to evolve rapidly, with exchanges now prioritizing:
- Enhanced security protocols
- Improved customer protection measures
- Greater transparency in operations
- Stronger anti-money laundering controls
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Frequently Asked Questions
Why did Japanese regulators issue these orders?
The FSA issued improvement orders to address compliance shortcomings in areas including governance, risk management, and customer protection at several exchanges.
Will this affect cryptocurrency trading in Japan?
Normal trading operations continue at all exchanges. Some have implemented temporary measures like paused new registrations during their improvement processes.
How long will the compliance improvements take?
Exchange estimates range from 1-2 months (Quoine) to unspecified timelines for more comprehensive overhauls at other firms.
What happens if exchanges don't comply?
Continued non-compliance could result in stricter regulatory actions, including potential license suspensions or revocations.
Are user funds safe during this process?
All exchanges have emphasized that user assets remain secure and accessible throughout their improvement implementations.
Who oversees cryptocurrency exchanges in Japan?
The Financial Services Agency (FSA) serves as the primary regulator, working with self-regulatory bodies like JVCEA.
This comprehensive response from Japan's cryptocurrency industry highlights its maturation and the increasing importance of regulatory compliance in the digital asset space worldwide. As exchanges implement these improvements, the market is expected to emerge stronger with enhanced protections for all participants.