TOKYO -- Two more Japanese cryptocurrency market operators are quitting as regulators tighten oversight of the sector, which makes five exchanges closing so far in the wake of a half-a-billion-dollar cryptocoin theft in January.
Tokyo GateWay and Fukuoka-based Mr. Exchange are withdrawing their applications to register with Japan's Financial Services Agency as exchange operators. The FSA on March 8 ordered both to improve their data security and other safeguards after they were found to be lacking.
The companies will leave the exchange business after returning clients' cash and cryptocurrency holdings.
A law that took effect last April requires cryptocurrency exchange operators to register with the FSA. Sixteen have done so, while another 16 were allowed to continue operating while their applications were under review.
The five exchange operators that have decided to pull out of the business are all part of this latter group, as is Tokyo-based Coincheck, from which hackers stole around 58 billion yen ($532 million at the time) in the virtual currency NEM in January.
After that, the FSA began on-site inspections of all 16 unregistered operators with pending applications. 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 the agency's standards.
Three other unregistered Japan-based operators -- Raimu, bitExpress and Bit Station -- have withdrawn their applications to register. More are expected to follow, as the FSA has given several exchanges a chance voluntarily close before ordering them to do so.