Japans watchdog outlines new criteria for crypto exchange regulations

This decision follows the security breach at Coincheck in which the company lost nearly USD 530 million in NEM tokens to hackers. Under the new guidelines, exchange operators registering with the Japanese authorities would have to meet five criteria.

First, exchanges would not be allowed to store currency in an internet-connected computer and are required to set multiple passwords for currency transfers. Second, exchanges need to intensify their efforts to prevent money laundering activities. This includes customer verification, particularly for large transfers.

Third, checks need to be performed on customer account balances multiple times a day to detect signs of any unauthorized diversions. Fourth, the FSA is also planning to ban those cryptocurrencies that offer a high level of anonymity and are used for money laundering activities. Fifth, exchanges would be subject to stricter internal regulations, to prevent employees from rigging the system.

The new five-point framework could be implemented when the FSA begins accepting new registration applications again, expected in mid-2018, according to EconoTimes. In addition, existing operators would also be required to meet these requirements, the online publication continues.