Virtual currency exchanges to be put under surveillance by FSA

The Financial Services Agency will put virtual currency exchanges operating in the country under full surveillance from October, officials have said.

The FSA will monitor whether the exchanges for bitcoin and other digital currencies have appropriate internal systems, including ones to protect customer assets. If necessary, the agency will carry out on-site inspections.

Virtual currencies have led to the creation of innovative services thanks to their low settlement and remittance costs, while they have been used in crimes such as fraud and money laundering.

“We pursue both market fostering and regulation enforcement,” an FSA executive said. “We aim for sound market development.”

Virtual currencies can be bought and sold on exchanges run by private companies. Pundits say there are more than 20 such exchanges in Japan.

All digital currency exchanges operating in Japan are required to register with authorities by the end of September under the revised payment services law that went into effect in April.

Last month, the FSA established a 30-strong surveillance team including agency and local finance bureau officials with relevant expertise.

The team is checking whether virtual currency exchanges manage customer assets separately from their own assets and whether they have appropriate risk management measures, including how to respond to cyberattacks, in place.

Among major virtual currencies, bitcoin has seen its price seesaw, soaring four to five times from the start of the year before taking a sharp downturn.

Some companies have raised funds using such currencies in so-called initial coin offerings. But there have been cases in which the novel fundraising method was abused by fraudsters.

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