News Regulation

Japan’s FSA has stopped activity of two crypto exchanges

Japan’s financial regulator has ordered two cryptocurrency exchanges in the country to stop their operations for two months because of insufficient know-your-customer (KYC) procedures.

The suspension will last until June 5 and June 7, respectively, for Eternal Link and FSHO, according to two administrative penalty orders issued by the Financial Services Agency (FSA) on Friday.

Through its months-long inspection, the FSA alleged the two operators had not properly required to customers to provide information such as purposes of trades. They had also not implemented procedures around reporting suspicious transactions to the agency.

According to the FSA, the failure to put such anti-money laundering efforts in place is not in compliance with the Act on Prevention of Transfer of Criminal Proceeds.

Separately, the penalty order to Eternal Link indicates that the company had violated laws in Japan by using customers’ deposits to pay for company expenses, even if temporarily.

Eternal Link, FSHO and the third local exchange, Last Roots, were all found to have made insufficient improvements to their internal safety measures that guard user information against potential cyber threats.

The new FSA suspension order sent to FSHO follows a one addressed to the firm on March 8. At the time, another exchange, Bit Station, was also ordered to stop its operations, while five others were ordered to report back to the FSA regarding business improvement measures.