Over 100 Firms Seek Licenses to Operate Cryptocurrency Exchanges in Japan

There are over 100 companies reportedly waiting for the Japanese Financial Services Agency to approve their registrations to operate cryptocurrency exchanges. While only 16 exchanges are fully licensed in Japan, the agency has allowed another 16 to operate without a license for the time being. However, going forward, only those with sufficient safety and customer protection measures are likely to be approved.

100+ Firms Have Applied

The Japanese Financial Services Agency (FSA) has been busy with over 100 applicants waiting for approval to operate cryptocurrency exchanges, local media reported. According to Business Insider Japan, these companies include major banks, brokerage firms, and major FX companies. The Yomiuri Shimbun newspaper elaborated, citing a source:

More than 100 firms are planning to enter the cryptocurrency exchange business, which has kept the FSA busy dealing with them.

Since Japan legalized bitcoin and other cryptocurrencies as a method of payment in April of last year, crypto exchanges are required to register with the FSA. The agency started issuing licenses in September of last year. So far, 16 crypto exchange operators are fully licensed such as Bitflyer, Bitpoint, Bitbank, GMO Coin, Quoine, and Tech Bureau’s Zaif.

Many other companies have applied for a license from the FSA, including Line Corp which operates Japan’s most popular chat app. The company announced its plans to enter the crypto space five days after popular exchange Coincheck was hacked for 58 million yen (~USD$583,000) worth of the cryptocurrency NEM, causing massive media coverage and multiple class-action lawsuits. “We’ll take solid safety measures,” Line Corp’s president Takeshi Idezawa recently commented.

Re-evaluating Quasi-Exchanges

In addition to the 16 crypto exchanges that are fully licensed, the FSA has allowed another 16 companies to conduct business as “quasi-operators” for cryptocurrencies.

“Quasi-operator is a special category for cryptocurrency exchange businesses,” the Yomiuri Shimbun explained. “The FSA allows the operation of exchanges that were started before the registration system was put in place.”

However, the hack of Coincheck has made the agency debate whether to allow the registration of quasi-operators of cryptocurrencies. The agency has announced that it will conduct on-site inspections of these exchanges “and examine whether they take appropriate safety and customer protection measures,” the publication described, adding:

The agency is prepared to refuse registration for operators that fail to take safety measures and properly manage customers’ assets, but that could cause a backlash from cryptocurrency operators and users.

The current law does not specify how long quasi-operators can continue to conduct business without having a full license, the news outlet noted. “The agency concluded that it is not desirable, in terms of user protection, to allow unregistered operators to still be in business nearly one year after the enforcement of the revised law,” which went into effect in April of last year.

Applicants Need Sufficient Safety Measures

A source close to the FSA told the news outlet that some quasi-operators have yet to install sufficient safety and customer protection measures, therefore it will be difficult for them to get a license. According to the source, for those that fail to improve their situation quickly, “the FSA is considering notifying them that their registration has been rejected based on the revised law,” the publication detailed, emphasizing:

However, as these unqualified operators already have customers, there are concerns that distributing such notices could draw criticism that the FSA is acting high-handedly and causing turmoil among customers.

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