APCU News Letter, Series “Politics and Currencies in the Blockchain Era”

◇Looking ahead to the blockchain era～Reorganization of virtual currency exchanges are moving ahead lead by the FSA

In these past few months, we have seen a notable trend among large corporates towards capital participation in virtual currency exchanges. In the background, there is the instruction given from the Financial Services Agency of Japan (FSA) to the virtual currency exchange companies to have an operating structure “of the same level as financial institutions”. This was triggered by FSA’s on-site inspection following Coin Check’s huge sum virtual currency outflow incident. As a result of the FSA’s on-site inspection of 16 operators (as of such date) comprising 7 out of 16 fully-licensed operators as well as other deemed dealers, it was pointed out that “There are still many corporate managers who lack knowledge of the finance business, although they may have detailed knowledge of technologies” and “There is also a lack of human resources among the executive officers who have knowledge of risk management within the finance business”, and the FSA has suggested that the exchanges “receive capital injection from financial institutions”.  In response to this, the operators have been progressing with hiring human resources who have experience in risk management and compliance at financial institutions in line with the FSA’s policies. . Since then, there has been an active trend among large securities companies and corporates to propose acquisitions or capital alliances with full-licensed operators and deemed dealers. In fact, with respect to the acquisition of Coin Check, it has ultimately become subsidiary of Monex Group, the large on-line securities firm. In order to enter into the virtual currency industry, it is easier for large financial institutions to acquire already registered virtual currency exchanges, rather than having to go through the registration process with the FSA which may take a long time. On August 20, large internet securities company SBI Holdings announced that it will make a capital injection into Lastroots, which is a deemed dealer which has received a business improvement order from the FSA, and Monex will also send in directors to the company. Such trends towards reorganization of the crypto-exchanges will be a large stimulus for the recently stagnant virtual currency market, and will contribute to revitalization of the market.