Two Japanese cryptocurrency exchanges have reportedly withdrawn applications with the Japanese Financial Services Agency (JFSA) amid the regulatory crackdown after Coincheck’s well-known $530 million NEM theft. These two new closures amount to five exchanges so far that have ceased operations in Japan since a law requiring exchanges to register with the JFSA went into effect earlier this year.

According to a Nikkei report, the cryptocurrency exchange operators Tokyo Gateway and Mr. Exchange are withdrawing their applications to register with Japan’s Financial Services Agency. On March 8th, the JFSA ordered both companies to improve their data security and other safeguards, which were found by the JFSA to be insufficient.

Ultimately, the JFSA order led to the exchanges withdrawing their previously filed crypto exchange applications, which is needed to launch domestic services, cease exchange operations and return clients cash and cryptocurrency holdings.

Coindesk reported that “Mr. Exchange posted on March 8 that it had received an order requiring it to beef up its internal protocols in the wake of the attack on Coincheck in late January. The incident resulted in approximately $533 million worth of the cryptocurrency NEM token being stolen.”

A law requiring cryptocurrency exchanges to register with the JFSA took effect last April, which is the same ruling that allowed the acceptance of Bitcoin as payment. According to Nikkei, “Sixteen have done so, while another sixteen were allowed to continue operating while their applications were under review.”

The Nikkei news outlet further reported on the JFSA probes:

These exchange operators are required to have data security and other systems on par with those at the 16 registered exchanges. But the FSA’s probes have so far found problems with corporate governance and internal controls. Some operators see little prospect of meeting with the agency’s standards.

CCN reported that on March 8th, the JFSA issued “month-long business suspension orders to exchange operators FSHO and Bit Station.” The regulatory team found major issues with cybersecurity practices and evidence of money laundering measures.

More application withdrawals are expected from crypto exchanges in Japan, as the JFSA is allowing exchanges to voluntarily close before being ordered to do so.

Leading crypto exchanges Binance had also been issued a formal warning from JFSA. Reports claimed that the JFSA planned to file criminal charges if Binance refused to cease operations in Japan, as “cryptocurrency trading services can only e offered in Japan by exchanges that are licensed by the JFSA or by those awaiting their license.”

In the midst of this regulatory conflict with Japan, Binance announced plans to open an office in Malta. “We are very confident we can announce a banking partnership there soon,” Zhao said.

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