Seven Crypto Exchanges Punished By Japan For Regulatory Lapses

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Japan has penalized seven cryptocurrency exchanges, two of them being ordered to suspend their businesses, to help shore up the consumer protection after the $530 million heist of digital money from the Tokyo-based exchange Coincheck Inc. earlier in 2018.

During a briefing on Thursday, a senior official at Financial Services Agency (FSA) confirmed to the reporters that Coincheck had enough funding to reimburse its customers for the digital NEM coins (XEM) that were stolen from its exchange. He added that the company would make public the details of the reimbursement plan later that day.

Financial Services Agency (FSA) condemned the exchanges for operating in lack of sufficient internal control systems and then ordered improvement in different areas ranging from risk management to prevention of the criminal use of digital currency. The rap of FSA on Thursday briefly lowered the prices of down bitcoin.

The exchanges included of Coincheck which is now serving a second notice of that nature since it was also targeted during a heist which occurred in late January heist. There is also GMO Coin which is operated by GMO Internet Inc. (9449.T). Bit Station, as well as FSHO, were also ordered to halt their operations for one month.

These punishments signified the broadest response of FSA to concerns about security at the Japanese cryptocurrency exchanges, which initially were caused by the flop of the Mt. Gox exchange in 2014 and then resurfaced with the Coincheck heist.

The regulator stated that Coincheck was in lack of proper systems for taking care of risks like money laundering or terrorist financing. The exchange was given up to March 22 to report on how it is planning to would improve.

It further issued a notice to six other exchanges saying that the seven exchanges did not have proper and the necessary internal control systems for operation. It gave a suspension order for all activities at two of the seven exchanges barring operation of Bit Station and FSHO, for a month beginning Thursday.

Coincheck has confirmed that it will compensate investors who lost their cryptocurrencies with approximately $434 million. The exchange said that it would lift limits on trading of some cryptocurrencies that were imposed after the heist.