Financial Services Agency (FSA) announced the move following the country’s plan to boost economic growth through fintech industry

Japan has announced that its financial regulator will require cryptocurrency exchanges in a bid to increase internal supervision of virtual currency and digital money, Reuters reported.

Financial Services Agency (FSA) is behind the move due to challenges in monitoring the security of virtual currencies. The fact that Japan has committed to take on the fintech industry as one of its economic vehicles also make the country prone to virtual currency risks.

The decision was in part an immediate follow up after a few security lapses at last year’s exchanges. FSA allowed the less-secure “hot wallets” that stores virtual currencies on platforms connected to internet before shifting to its counterpart, the internet-free “cold wallet” that’s more secure.

However, even with cold wallet, FSA now isn’t ruling out the risks of internal theft. Some exchanges have been found failed to have rules where the person in charge of the storage would be regularly rotated out, the unidentified source said.

To date, there are 19 registered cryptocurrency exchanges in Japan, including some that are not yet operational. The FSA will conduct the investigation and determine which exchanges are subjects to improve their security.

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In 2017, Japan was the first country to regulate cryptocurrency exchanges nationwide. Even with being advanced, just last year hackers stole US$530 million of digital money from a Tokyo-based exchange.
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