Japan’s Financial Services Agency (FSA) has issued warnings against five overseas cryptocurrency exchanges, including Bybit Fintech Ltd., KuCoin, MEXC Global, Bitget Ltd., and Bitcastle LLC. The exchanges are accused of violating Japan’s cryptocurrency regulations by operating without registration, potentially exposing users to financial risks.
Five non-compliant cryptocurrency exchanges named
According to a report by CoinPost, the FSA has named five cryptocurrency platforms — KuCoin, Bybit, MEXC Global, Bitget, and Bitcastle — that offer services to Japanese users without mandatory registration. These platforms engage in cryptocurrency trading activities in Japan without obtaining authorization from the FSA or the local financial bureau.
The lack of registration raises serious regulatory concerns. Japan’s legal framework for cryptocurrency exchanges imposes strict compliance measures to protect consumers. These platforms operate without proper registration, bypassing important regulatory provisions and exposing users to significant financial risks.
Risks of using unregistered cryptocurrency platforms
Unregistered exchanges lack the necessary regulatory oversight to ensure responsible operations. A major issue highlighted by Japan’s Financial Services Agency (FSA) is the lack of asset segregation, which means these platforms may mix customer funds with their own operational assets. This practice increases financial management risks and jeopardizes the safety of customer assets.
Furthermore, users of unregistered platforms do not enjoy the legal protections provided by Japanese law. In the event of bankruptcy, security breaches, or disputes, customers have limited options for compensation. Failure to comply with Japan’s cryptocurrency regulations leaves users vulnerable to severe financial losses.
Cryptocurrency regulation in Japan
Under Japanese law, companies that provide cryptocurrency trading services must register with the FSA or the local financial bureau. This registration ensures that exchanges operate under a secure and transparent regulatory framework. Registered platforms must adhere to strict asset management safeguards and maintain operational transparency.
The FSA’s recent warnings highlight the importance of verifying a platform’s compliance status before using its services. These actions reflect Japan’s commitment to protecting consumers and maintaining market integrity in the cryptocurrency space.
Japan says to unregistered exchanges: Get your business in order!
Japan’s FSA named Bybit, KuCoin and other exchanges as unregistered and having problems.
These platforms were quietly conducting cryptocurrency trading in Japan without the correct documentation, and now their users are exposed to risk.
No… pic.twitter.com/IMHJzOMKQC
— Mario Nawfal’s Roundtable (@RoundtableSpace) November 29, 2024
Broader regulatory efforts
The warning is part of Japan’s overall strategy to strengthen regulation of the cryptocurrency industry. The country recently restructured its Web3 leadership body in an effort to enhance regulatory clarity and foster innovation in the digital asset space. Japan’s proactive approach is critical to re-establishing its leadership in the global cryptocurrency and Web3 space.
Globally, the regulatory landscape is also evolving. For example, the UK’s Financial Conduct Authority (FCA) has announced plans to implement comprehensive cryptocurrency regulation by 2026. These efforts will cover trading platforms, crypto lending, and stablecoins, and bring the UK in line with other leaders such as Hong Kong and Singapore.
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