The Financial Services Agency of Japan (FSA) is preparing to tighten the requirements for local crypto exchanges to protect investors and reduce the risks of large-scale hacker attacks. It is expected that new, more stringent rules for the regulation of exchanges will be realized this summer and will be distributed to both existing and new platforms. Those exchanges that do not comply with the new rules will have to curtail their activities.
The new rules can be divided into five main points. First of all, exchanges will be obliged to adhere to high standards in the field of security, including a ban on the storage of assets on online purses, as well as mandatory introduction of multifactor authentication.
As part of the fight against money laundering, platforms will have to step up measures to identify customers.
The third requirement of the FSA will be the following instructions regarding asset management. In particular, investors ‘assets should be clearly separated from the stock exchanges’ own assets, while balances on client accounts will need to be checked daily. It is supposed that this will help in the fight against possible manipulations. Also, regulators insist on the use of mechanisms that will not allow the employees of exchanges to carry out transactions with clients’ assets.