Coinbase Chief Policy Officer Says Japanese Crypto Exchange Licensing Talks Are “Going Well”
Will Coinbase Get It's Japanese Crypto License Soon?
Mike Lempres, the chief policy officer of Coinbase, has been speaking with the press about a recent decision for his platform to receive licensing in Japan. The regulators in the country are working on tougher regulations, but it doesn’t deter Lempres from proceeding with their efforts. Still, despite this potential setback, Lempres says that their process is “going well.”
The entity in charge of approving licensing is the Financial Services Agency (FSA) in Japan. With every roadblock that the authorities can put up, Lempres said that he and his platform are “committed to getting it done,” believing that the actual approval will be sometime in 2019. The company has been planning to get involved with the Japanese market for three years, and even added Nao Kitazawa, a former staff member of Morgan Stanley Japan, to run Coinbase’s local office four months ago.
As of last month, Lempres is not working as the chief legal officer in this circumstance, instead turning his focus to government affairs. This transition makes it easy for him to understand why the FSA is highly concerned with maintaining security in their financial market. Their worries are further substantiated by the two major crypto hacks that they experienced this year with Coincheck (January) and Zaif (September). It was no small hack – the Coincheck breech alone cost them $532 million.
So far, the FSA has received and reviewed 16 different applications for cryptocurrency licensing. However, there have been no approvals or issuances yet. According to multiple sources, there are still 160 firms, cryptocurrency and public companies alike, that intend to apply for exchange licenses.
Lempres believes that this stringent approach could bode well for their platform, considering that 99% of Coinbase’s funds are stored in offline wallets with no internet connection. This simple step makes it significantly less likely that any breech or cyber attack could take place, and the Japanese regulators are “more focused on security,” says Lempres.
Right now, the latest concern is if the FSA would require Coinbase to duplicate their current system in place in the United States to the Japanese industry. Since this would require an internet connection with the platform, Lempres believes that it could lead the platform directly into a cyber-attack. From the FSA’s perspective, it would be a way for them to monitor the transactions on Coinbase’s platform.
According to Lempres, this transition wouldn’t be easy. He said:
“We have everything built to protect our storage … in the U.S. … It would be hard for us to duplicate what we do in the U.S. today in Japan and other countries.”
In the meantime, regulators are working to make the process simpler for them to evaluate all of the upcoming applications. A regulator recently said that they increased
“the number of questions asked when screening applications to about 400 items, up fourfold.”