Japan's Financial Services Agency (FSA) plans to strengthen internal audit procedures at financial institutions, including exchanges. According to a recent statement, the agency aims to address industry gaps and align with global standards for regulatory compliance.
The FSA said it will hold discussions to seek solutions to improve the effectiveness of internal audit in the financial sector in Japan.
These discussions will involve representatives from the Japan Exchange Association and other financial industry groups, such as the Japan Financial Services Association, the Japan Payment Services Association, and the Japan Banking Association.
The initiative was launched after a recent supervisory report from the FSA highlighted the poor auditing and oversight practices of many companies. The FSA plans to amend the 'Current Situation and Issues' guidelines to include additional auditing measures that reflect international management trends.
Crackdown on unregistered exchanges
The FSA's efforts follow recent warning letters sent to 5 exchanges accused of operating without valid registration. These exchanges include Bitcastle LLC, Bitget Limited, Bybit Fintech Limited, KuCoin, and MEXC Global.
In Japan, exchanges serving local residents are required to register with the FSA or a financial authority. The financial regulator stated that any unregistered exchange operates outside its oversight, raising concerns about the segregation of customer assets and platform security.
The FSA warns users of unregistered exchanges that they may not have asset protection or compensation under Japanese law. This legal loophole could leave customers vulnerable in disputes or unforeseen incidents.
Cautious approach
Such developments indicate that Japan continues to adopt a cautious approach to cryptocurrency and focuses on protecting users.
This week, Japanese Prime Minister Shigeru Ishiba revealed that the country will not integrate Bitcoin into its reserves despite the coin being increasingly accepted globally. According to him, digital assets like Bitcoin conflict with the goals of the national financial reserve strategy due to their high volatility.
According to the report, Japan maintains a strict stance on cryptocurrency-related exchange-traded funds (ETFs), even as these products achieve unprecedented success in markets like the United States.
Despite a cautious stance, the 'land of the rising sun' has positioned itself as a friendly country towards digital assets. Recent efforts such as a groundbreaking economic stimulus package include reforms to the country's cryptocurrency tax laws.
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