Japan’s Finance Services Agency (FSA) is sending a clear message to crypto exchanges in the country – get registered or else! In an unexpected move, the FSA issued a warning letter to four of the country’s leading crypto powerhouses – Bitget, Bybit, MEXC Global, and BitForex – for failing to receive proper registration.
The letter outlined that the firms had violated Japan’s fund settlement laws by “conducting crypto asset exchange business without registration.” With over 21 million users between them, this is a warning that cannot be ignored.
Moreover, Bybit was the subject of a similar notice from the FSA in the spring of 2021. The warning came as the platform was in the middle of a marketing campaign actively targeting Japanese investors, and it has led some to question the regulator’s motivations.
“Such public reprimand for running an unregistered business has not occurred for a while, so one is to assume that the FSA has witnessed aggressive marketing by Bybit to Japanese investors that goes beyond the common transgressions of presenting their website in Japanese and not blocking Japanese IP addresses,” commented Norbert Gehrke, founder of Tokyo Fintech.
Two of the largest cryptocurrency exchanges in Japan, Kraken and Coinbase, left the country at the end of January and February 2021 respectively, citing the unsatisfactory market conditions.
“Current market conditions in Japan, in combination with a weak crypto market globally, mean the resources needed to further grow our business in Japan aren’t justified at this time,” Kraken explains.
Meanwhile, Coinbase warned Japanese customers to withdraw their crypto holdings from the platform, which would be converted to Japanese yen if left uncollected.
“We’ve decided to wind down the majority of our operations in Japan, which led to eliminating most of the roles in our Japan entity,” said Nana Murugesan, Coinbase’s Vice President for Business Development and International.
Undeterred, Binance strengthened its presence in the country by purchasing Sakura Exchange BitCoin (SEBC) in November 2020. SEBC is a Japanese cryptocurrency organization supervised by the FSA, and as such it may have been seen as a safe option for Binance to avoid the regulator’s wrath.
Nevertheless, the FSA showed that they are serious about regulatory compliance when they issued a formal warning to the platform in 2021.
It is clear that Japan’s Financial Services Agency is taking a tougher stance on unregistered crypto exchanges in an effort to protect users. JP Morgan called 2021 “the year of regulatory reckoning” and it appears that the FSA is now trying to crackdown on those seeking to take advantage of the current market conditions. The warnings issued to these four exchanges demonstrate that the agency is committed to upholding the regulatory framework and protecting Japan’s crypto investors.
Time will tell if the warnings will be enough for crypto powerhouses to comply with the regulations, or if further repercussions will be used to get the message across. As the US and China try to crush Binance, with South Korean Financial Services Agency even levying a 40 million dollar bribe claim, the Japanese FSA’s warning will be integral to offering a secure infrastructure for crypto exchanges.
