More Oversight for Crypto Exchanges
Japan’s FSA is clamping down on the financial industry, with increased focus on internal audits, which are especially scant in the cryptocurrency sector. This announcement was made in the 2024 monitoring report presented by the agency, indicating a number of lapses in oversight amidst the rapid growth of the sector and with growing cybersecurity risks.
Revised Guidelines and Hearings
In a statement on Dec. 26, the FSA announced the intention of rewriting the “Current Situation and Issues” guidance to get the country closer to the practices of auditors globally for better transparency and accountability in case of wrongdoings at financial firms.
It plans to host a “Roundtable on the Improvement of Internal Audits at Financial Institutions” at the end of January 2025. Among the attendees will be banking industry representatives, as well as the Japan Crypt-Asset Exchange Association, which encompasses big exchanges like bitFlyer and Coincheck. Further information about the roundtable remains to be seen, but the gathering would be set up to facilitate discussions and coordination to improve audit standards.
Addressing Cybersecurity Concerns
The move by the FSA follows a major cyberattack that targeted Japanese crypto exchange DMM Bitcoin. Hackers believed to be from North Korea reportedly made off with $307 million in May 2023. In a Dec. 23 news release, Japan’s National Police Agency and the FBI outlined the attack as caused by a cybercrime group identified as TraderTraitor, also referred to as Jade Sleet, UNC4899, and Slow Pisces.
The incident underlined weaknesses in the Japanese cryptocurrency business and emphasized the need for greater internal control. The regulator tries, with the introduction of improved auditing, to minimize the level of such risks and digital assets’ safety within a financial system.
Improving Japan’s Financial Security
These updates are expected to further strengthen confidence in financial markets in Japan. The agency, in turn, pays close attention to internal audits and cybersecurity challenges in trying to create a more resilient financial ecosystem.
It illustrates greater interest in committing to Japan’s reputation of being a leading nation within global financial regulation without hindering innovation in cryptocurrencies. That said, a strengthened auditing environment and oversight is expected to pave the way for much greater investor confidence.
