Japan’s Financial Services Agency (FSA) has ordered the Japanese cryptocurrency exchange, Minnano to re-evaluate their business, as they have failed to follow set rules. After several inspections, Minnano has until May 14, 2018 to make the necessary changes to its business model and to submit a written report.
It is believed that the FSA conducted an on-site inspection of Minnano, after having received a potential system risk management report. The FSA later concluded that the Japanese exchange has failed not only in maintaining an effective management control system, but the exchange’s “compliance with laws and regulations and proper operation of business” has been deemed problematic.
The inefficiency on Minnano’s part is believed to likely create several problems, mainly the potentially it has in opening doors to money laundering and financing terrorist activities. Other problems that may arise, according to the FSA, include “outsourcing and lack of control over system risks”.
After completing the inspections, the FSA firmly stated that five areas of the Japanese business need more attention, which include “building a business management system, a management system that prevents money laundering and other illegal matters, an effective bookkeeping system, a management system that places great emphasis on user protections, and a system risk and outsourcing management system”.
The fact that Minnano has several areas to work on is surprising, as the exchange currently has three major cryptocurrencies listed, which include Bitcoin (BTC), Ether (ETH) and Bitcoin Cash (BCH). Minnano has recently made a statement in relation to the efforts made by the FSA and it goes as follows:
“we take administrative punishment solemnly and sincerely, establish a posture for the proper and reliable execution of the virtual currency exchange industry…and recover customer’s trust with full power.”
The FSA has been taking serious action against Japanese crypto exchanges in recent times, as the biggest hack in January 2018 resulted in over $400 million in cryptocurrency. This is not the first time that a Japanese exchange was deemed ineffective in building a strong and secure system to monitor trading activities and equally poor at training its staff.
So far, Coincheck and FSHO, Japanese exchanges, have received two orders for improvement. Will the FSA’s hunt continue to reveal more unlicensed, and dysfunctional crypto exchanges?