Japan's FSA tightens crypto exchange rules on fraud and cybersecurity

Japan’s Financial Services Agency (FSA) advanced its regulatory march this week with a new set of rules on how it expects crypto exchanges to report cyberattacks and handle withdrawals flagged for scams.

Per local reports, the latest recommendations that the regulator is pushing include a single form format for exchanges, as well as other tech sectors, to escalate breaches to the proper channels. The other involves how platforms move Japanese users’ funds, especially when they carry fraud red flags.

Japan is slowing down how stolen money moves

Japan’s National Police Agency and the FSA listed out 11 anti-fraud steps in an August 6 directive to members of the Japan Virtual and Crypto Assets Exchange Association (JVCEA), the industry’s self-regulatory body.

The instructions contained actions targeting accounts implicated in fraud proceedings and their ability to send out funds. 

First, exchanges need to allow funds sit in a flagged account for a set amount of time before withdrawals can start to go through. Also, funds can only be sent to destination addresses that have been registered in advance. The account operator would need to wait through a cooldown period before transfers can be processed into newly added addresses.

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