The two exchanges are following the lead of three other Japanese exchanges, Raimu, Bit Station, and bitExpress which have also announced that they will be ceasing operations in Japan.
Last year Japan became the sole country in the whole world to oversee the exchanging of cryptocurrency at the national level.
The Japanese Financial Services Agency initially licensed 11 exchanges in September of 2017.
In early December, the Financial Services Agency licensed another four, and at the end of December, it licensed a sixteenth exchange. Additionally, the Financial Services Agency allowed a further 16 exchanges to continue operations while their applications with regulators were pending.
One of those 16 exchanges allowed to continue operations with a pending license was the infamous Coincheck.
illion yen ($534 million) worth of the digital currency NEM (XEM token) was stolen.
After the hack, the Financial Services Agency began on-site inspections of all 16 unregulated exchanges and found issues with internal controls and the corporate governance thereof. The Financial Services Agency provided several exchanges the opportunity to shut themselves down and thus save face, rather than waiting to be shut down by the government in the event that they weren’t issued a license.
Japan is the world’s “canary in the coal mine” in terms of digital currency regulation. No other country has put in place nationwide regulatory standards for cryptocurrency exchanges at the level of the Japanese. The ultimate success or failure of Japan’s regulatory efforts will very likely determine the future of digital asset regulation and the subsequent sentiments regarding such administrative regulation.
More exchanges will likely follow in the aforementioned exchanges footsteps choosing to voluntarily shut down Japanese operations, rather than waiting for the government to shut them down upon denying their applications. Think of it as crypto-Seppuku…
If Japan’s regulatory experiment is in fact successful in minimizing criminal activity financed through digital currency while maximizing the safety of digital assets for legit/accredited investors then we will see other government bodies internationally put national cryptocurrency regulations in place with little to no resistance.
However, if Japan’s digital asset regulations end up hindering innovation in the cryptocurrency space then the country is at risk of losing their now competitive edge against the remainder of the world in the crypto-economy globally. This would inevitably lead to stern opposition to government interventions in the digital currency sectors of other countries.
The results of Japan’s regulatory experiment will without a doubt set the precedent for government regulation into cryptocurrency internationally. Whether the Japanese government is successful will ascertain whether digital asset regulation is welcomed by those who wish to increase the legitimacy of the crypto-economy, or opposed by those who fear that regulatory oversight will surely stunt the growth of a budding industry.