Japan: Issued FSA Notice on Enhanced Quality of Service Requirements for Cryptocurrency Exchanges in Japan

On 26 September 2024, the Financial Services Agency (FSA) issued a notice to the Japan Virtual and Crypto Assets Exchange Association, emphasising the importance of managing risks associated with the outflow of crypto assets. This action follows an incident in May 2024, where unauthorised outflow of user assets from a crypto asset exchange service was reported. The notice outlines the necessity for exchanges to establish an effective management system for crypto assets, including the implementation of cold wallet management and the investigation of unauthorised activities. The directive calls for a voluntary inspection by companies to ensure compliance with established guidelines and the effective functioning of a three-line defence system against crypto asset outflow risks. The results of these inspections are to be compiled and reported, highlighting the agency's commitment to user protection and the stability of the digital payment ecosystem.