At least 10 bitcoin companies are marked for inspection by Japan’s financial watchdog ahead of applying for licenses to operate as regulated exchanges.
As the trial of former Mt Gox CEO Mark Karpeles gets underway in Tokyo, Japanese authorities are moving to avoid any scenario of a Mt Gox-like collapse in the country.
According to report in the Nikkei today, the Financial Services Agency (FSA), Japan’s financial watchdog and regulator, will be stepping up its scrutiny of bitcoin exchanges as the cryptocurrency catches on in mainstream society.
The country’s primary financial regulator will check to see if adequate user protection measures are in place at bitcoin companies. Industry firms will also be quizzed on whether and how they educate and inform investors and buyers about volatility risks. Two of those companies include bitFlyer and Coincheck, two Tokyo-based exchanges that are the also the largest bitcoin trading platforms in the country.
Notably, the FSA will also examine the exchange’s books to see if it manages its digital holdings separately from customers’ funds. Bitcoin platforms’ maintenance and inspection habits of its own trading systems will also be looked into. If and when the FSA deems all of the checks to be satisfactory, only then will a company be able to apply for a license.
As reported by CCN in early May, 18 companies are set to launch bitcoin exchanges in Japan to help fulfill the growing demand for the cryptocurrency. Tellingly, 10 of those companies are new entrants to the bitcoin market, including the likes of Japanese internet giant GMO which launched a bitcoin trading platform later that month. The marked uptick in investments and the subsequent growth of Japan’s bitcoin industry comes after recent legislation that acknowledged bitcoin as a legal method of payment in the country.
As a part of the new law, bitcoin exchanges and brokers will be required to be registered under the FSA. However, no company was registered as of June’s end. Today’s report ads that business already operating as a bitcoin exchange prior to April ‘may be put off registering until the end of September’ presumably to ensure they have everything in order. The likes of bitFlyer has already moved to provide insurance services to retailers and merchants against failed customer payments through their point-of-sale systems.
Last year, Tokyo-based insurance firm Mitsui Sumitomo Insurance launched an insurance offering that would cover bitcoin exchanges against damages or losses due to breaches or hacks from 10 million yen to 1 billion yen (between $88,000 and $8.8 million).
Meanwhile, such is the adoption and growth of bitcoin in Japan that nationwide consumer electronics retailer Bic Camera enabled bitcoin payments across all stores in the country following a successful trial earlier in April. Midori Kanemitsu, chief financial officer at bitFlyer estimates that bitcoin-accepting retail storefronts could rise up to “300,000 or so in 2017.