Japan’s Financial Services Authority (FSA) is taking steps to strengthen internal audit processes at financial institutions, including crypto exchanges. The agency aims to address industry gaps and align with global standards in regulatory compliance.
A recent statement from the FSA indicates that a roundtable discussion will be held to explore ways to enhance internal audits in Japan’s financial sector. Key participants in this discussion will include representatives from the Japan Cryptocurrency Exchange Association and other financial industry groups such as the Japan Financial Services Association, Japan Payment Services Association, and Japanese Bankers Association.
This initiative comes in response to a recent FSA monitoring report that highlighted weak audit and scrutiny practices among financial firms in Japan. The FSA plans to update its guidelines on the “Current Situation and Issues” to include improved auditing measures that reflect international regulatory trends.
In addition to strengthening internal audits, the FSA has also been cracking down on unregistered crypto exchanges. The agency recently issued warning letters to five exchanges – Bitcastle LLC, Bitget Limited, Bybit Fintech Limited, KuCoin, and MEXC Global – for operating without proper registration. In Japan, exchanges serving local customers are required to register with the FSA or a financial bureau. Operating without registration means these exchanges are not under the supervision of the FSA, raising concerns about customer asset segregation and platform security.
The FSA has warned that users of unregistered exchanges may not have access to asset protection or compensation under Japanese law, leaving them vulnerable during disputes or unforeseen incidents.
Japan’s cautious approach to crypto is evident in recent statements from Prime Minister Shigeru Ishiba, who stated that the country will not integrate Bitcoin into its reserves due to its high volatility. Despite this cautious stance, Japan has positioned itself as a digital asset-friendly nation, with recent efforts including reforms to the country’s crypto taxation laws as part of a landmark economic stimulus package.
Overall, Japan’s focus on consumer protection and regulatory compliance in the crypto sector underscores its commitment to maintaining a stable and secure financial environment.