TOKYO -- Japan's Financial Services Agency on Tuesday issued a warning to Macau-based cryptocurrency exchange operator Blockchain Laboratory, which has been courting investors in the country.
The warning is the FSA's first following a revision to the payment services law last April. The law allows only registered cryptocurrency services, or those that have applied for registration, to do business in Japan. Blockchain Laboratory does not meet either criteria, yet the FSA found it has been offering seminars to attract Japanese investors.
The exchange operates as an initial coin offering agency. ICOs allow for fundraising with cryptocurrencies, and the seminars were designed to draw investment in newly offered tokens.
The regulator is concerned the company's activities could lead to investors incurring losses. If Blockchain Laboratory does not respond to the warning, the FSA intends to work with the police and the Consumer Affairs Agency to bring criminal charges.
The FSA is stepping up scrutiny of unregistered operators in Japan. It has repeatedly advised Blockchain Laboratory to halt its activities in the country, to no avail. So the agency issued a direct warning, naming the company on the FSA homepage.
Investment in cryptocurrencies has soared since 2017, coinciding with a surge in market values. Officials say some unregistered, malicious operators have collected hundreds of millions of yen. The FSA said it will tighten oversight and will continue to submit warnings when it finds wrongdoing.
Besides Blockchain Laboratory, the FSA is looking into 15 unregistered exchanges on suspicion of wrongdoing. The total number of unregistered entities remains unclear. "We have not figured out the whole picture, but the number seems to only increase as we investigate," an official said.
At this point, there are 16 registered exchanges and 16 applicants. One of the applicants is Coincheck, which lost $530 million worth of digital currency in a hack, and was ordered to submit a business improvement plan to the FSA by Tuesday.
"Protecting customers and limiting the extent of damage are of utmost importance," said Financial Services Minister Taro Aso. "We will continue to address issues to make sure consumers are protected."
The sheer volatility of the digital currencies creates risks for investors. The most recognized cryptocurrency, bitcoin, is trading around $8,700, down from about $20,000 in mid-December. During early February's market turmoil, bitcoin fell below $6,000.