Authorities in Japan have raided the offices of two cryptocurrency exchanges operating in the country over concerns about a change of management structure, Reuters reported.
Sources close to the matter told the news outlet Huobi Japan Inc. and Fisco Cryptocurrency Exchange Inc. were inspected by members of the Financial Services Agency (FSA) after the firms undertook significant restructuring.
The regulator, responsible for overseeing the emerging licensed cryptocurrency sector, was reportedly prompted by concerns over what this could mean for internal oversight at the exchanges.
According to the sources, the investigations included a review of anti-money laundering and customer protection measures, designed to ensure these were robust enough to comply with the regulator’s requirements.
Fisco Cryptocurrency Exchange was recently involved in the acquisition of hacked crypto exchange Zaif, after the firm lost $60 million in a devastating hack. Fisco stepped in to acquire the business of Zaif, including the liabilities that had arisen from the hack, with promises of customer refunds for those affected.
Huobi Japan is another recognizable name in the industry, created in 2018 after Singapore’s Huobi Group acquired local crypto exchange BitTrade, thereby effectively becoming a licensed operator in Japan in 2018.
Japan has been seen as an emerging world leader in crypto regulation, after introducing a system of licensing for cryptocurrency exchanges in 2017.
At the time, Japan was the first country in the world to move towards a system of regulation, in a move designed to foster the growth of the fledgling cryptocurrency sector while providing a layer of protection to consumers.
While there is no suggestion of wrongdoing, the investigations will raise questions about whether the firms had ensured adequate internal management structures to meet their obligations as license holders.
The actions of the Financial Services Agency in conducting these investigations will serve as a reminder to other firms operating under their jurisdiction, and the need to ensure a high standard of compliance and consumer protection.
The two firms have yet to comment on the FSA probe.
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