Japan's Financial Services Agency (FSA) announced on Thursday that it has punished seven cryptocurrency exchanges in the country, ordering two of them to suspend business operations in an effort to strengthen consumer protection. The move comes after a series of inspections triggered by the January hack of Coincheck, which saw over $550 million worth of NEM tokens stolen.
Regulatory Action: Bit Station and FSHO Ordered to Halt Operations
According to Reuters, Bit Station and FSHO were ordered to suspend business from March 8 to April 7. Both exchanges are operating as “quasi-operators,” meaning they are allowed to run crypto exchanges while their registration applications are pending with the FSA. The regulator also requested both exchanges to submit business improvement plans by March 22. Additionally, five other exchanges—Tech Bureau, GMO Coin, Lemuria Bitcoin Exchange (Bitcrements), Mister Exchange, and Coincheck—received improvement orders from the FSA. The first two are fully licensed exchanges, while the latter three are quasi-operators.
Background: Coincheck Hack Triggers Comprehensive Inspections
Since the revised Payment Services Act took effect in April last year, all cryptocurrency exchanges in Japan are required to register with the FSA. Currently, 16 exchange operators have been licensed, and another 16 are permitted to operate as quasi-operators. More than 100 companies are reportedly seeking to enter the space. After the Coincheck hack in January, the FSA began inspecting all crypto exchanges in the country. The inspections target both licensed and unregistered operators. “While not yet complete, the FSA inspections have apparently found enough issues with customer protections and anti-money-laundering measures that the agency fears another Coincheck-style hack,” Nikkei reported.
Specific Violations: Employee Misappropriation at Bit Station
During the inspections, the FSA discovered that a senior employee at Bit Station had used customers' Bitcoin for personal purposes. As a result, Bit Station dropped its application to become an authorized exchange. The FSA noted that five unregistered operators were particularly problematic and would need to either meet regulatory requirements and complete registration or withdraw their applications. Regarding Coincheck, the FSA confirmed that the exchange has sufficient funds to repay customers as promised, despite earlier doubts about its solvency.
Industry Implications and Future Outlook
Japan’s tough stance sends a clear signal to the entire cryptocurrency industry: compliance and customer protection are non-negotiable. The FSA’s actions are expected to accelerate the consolidation of exchanges, promoting a more standardized and secure trading environment. For investors, choosing registered and regulated exchanges remains crucial to mitigating risks. As more detailed regulations are implemented, Japan's crypto market is likely to evolve into a safer and more mature ecosystem.