Japan’s Financial Services Authority (FSA) is taking steps to enhance internal audit processes at financial institutions, including crypto exchanges. In a recent announcement, the agency outlined plans to address industry gaps and bring its regulatory compliance standards in line with global norms.
A roundtable discussion will be convened to explore ways to improve internal audits within Japan’s financial sector. Key participants will include representatives from the Japan Cryptocurrency Exchange Association, as well as other industry groups such as the Japan Financial Services Association, Japan Payment Services Association, and Japanese Bankers Association.
The move comes on the heels of a recent FSA monitoring report that identified deficiencies in audit and scrutiny practices at various firms. To address these shortcomings, the FSA intends to update its guidelines on the “Current Situation and Issues” to incorporate more robust auditing measures that align with international regulatory trends.
In addition to bolstering internal audit processes, the FSA has also been cracking down on unregistered crypto exchanges. Five exchanges – Bitcastle LLC, Bitget Limited, Bybit Fintech Limited, KuCoin, and MEXC Global – recently received warning letters for operating without proper registration. In Japan, exchanges serving local customers are required to register with the FSA or a financial bureau. The regulator emphasized that unregistered exchanges operate outside its oversight, potentially exposing customers to risks related to asset segregation and platform security.
The FSA cautioned that users of unregistered exchanges may not have access to asset protection or compensation under Japanese law, leaving them vulnerable in cases of disputes or unforeseen incidents.
These developments underscore Japan’s cautious approach to cryptocurrencies, with a strong emphasis on consumer protection. Prime Minister Shigeru Ishiba recently confirmed that Japan will not be including Bitcoin in its reserves, citing the digital asset’s high volatility as incompatible with the country’s financial reserve strategy.
Despite its conservative stance on certain crypto-related products, Japan has positioned itself as a crypto-friendly jurisdiction. Recent initiatives include a significant economic stimulus package that includes reforms to the country’s crypto taxation laws.
Overall, Japan’s efforts to strengthen internal audit processes and regulate the crypto industry reflect its commitment to maintaining a secure and stable financial environment for both investors and consumers.