LBank in Hot Water for Breaking Japan’s Financial Rules

LBank cryptocurrency exchange platform showing trading charts and digital assets.

LBank in Trouble for Breaching Japan’s Financial Rules

Japanese financial regulator FSA undauntedly alerted LBank to a case where it was involved in a transaction without a proper registration.

FSA Points Out Conundrums at LBank

Cryptocurrency information website, Coinpost, reports that Japan’s Financial Services Agency (FSA) noted that the said cryptocurrency exchange was actually “an extremely moribund address” and operated with an “unknown address” and “unknown representative,” which are “special reasons” to worry about transparency and control. During March, the trading floor was seen in the news, alleging that LBank made possible crypto transactions with Japanese residents via the web, which is a clear violation of Japan’s regulatory framework.

LBank is a centralized crypto exchange which has been established since 2015 and is based in the British Virgin Islands, a British territory. The platform, with a wide variety of 671 coins and 814 trading pairs, is one of the most popular among the CoinGecko top 100. According to the data from CoinGecko, the 24-h spot trading of LBank is currently #55 in terms of the volume.

Compliance or Globalization: A Crossroads for Authorities

The financial regulator in Japan issued a warning letter to LBank in the wake of their recent celebration of a high-profile web3 investor meeting in Dubai. It was, however, commented on the incongruity between these activities and the non-compliance with regulations.

Example in the Past of Warnings to Crypto Exchanges

The new LBank warning is not the only one that came from the FSA which has previously held a finger at the crypto exchanges running here. It is said that the same regulatory body only a few months ago, in March 2023, swept similar warning messages to four other companies, Bybit, MEXC, Bitget and Bitforex. These exchanges were also discovered to be rendering crypto trading services to Japanese residents without registration.


CoinGecko’s latest market statistics reveal that Bitget and Bybit are the kingpins globally as they occupy the third and fourth position, respectively, concerning the number of visitors they have got in the last 30 days. Bybit, rooted in Japan, receives due to being a major player in the space of the derivatives market, and that’s why it’s the most liked Asia. The platforms are well-liked, but there are strict regulations that restrict the access of Japanese traders to them .

Comparative Legal System and Financial Regulations in Japan and the United States

First the U.S. compared to Japan, while the latter accepts cryptocurrencies as legal property under the Payment Services Act, the former has a more rigid regulatory scheme. The Japanese government currently allows cryptocurrencies within the scope of the Payment Services Act (PSA) but the exchanges must registry themselves with the FSA and strictly obey the rules of CFT and AML. With regard to the particular regulatory challenges in Japan, most of the cryptocurrencies represent assets while initial coin offerings (ICO) tokens are classified as type 2 securities, which are regulated by the Financial Instruments and Exchange Act (FIEA) of the country, I will focus my attention on the main issues associated in Japan at the moment.

Though American regulation can be characterized as a scattered network one that changes over time. Under President Joe Biden’s administration in 2022 activities at the policy level were mainly targeted in this direction whereby actions got catalyzed in the bit of initiating the executive order to the evaluation of the risk of the digital currencies and then developing the roadmap. This had even the unintended consequence of greater regulatory enforcement. Nevertheless, President Biden decided, as part of his wish for stronger financial regulations, to negate a bill from the House of Representatives, which through the U.S. Congress, would have cancelled an SEC rule which was disputed for causing difficulties in providing custodial services to crypto businesses.

The Securities and Exchange Commission (SEC) has been aggressive in addressing issues related to the regulation of the crypto industry and acting accordingly to it. They have managed to successfully secure a verdict on the 2023 court case where it had been ruled that Ripple’s sale of XRP was a security only when it was sold to financial institutions and not on exchanges which was criticized as the main reason for the massive token industry.

Japan and the U.S. are both demonstrating efforts in the refinement of their regulatory policies which are successfully pursued by Japan through a highly organized and direct approach, while the U.S. is still under way with its constant legal and regulatory discussions.