Japan's Financial Watchdog Cracks Down on Unregistered Crypto Exchange LBank

On June 14th, the FSA announced that it had warned LBank Exchange for offering "cryptocurrency transactions without registration" to Japanese citizens. Under Japanese law, all domestic and foreign crypto exchanges actively soliciting Japanese customers must obtain an operating permit from the FSA through a rigorous application process.

The FSA's Heightened Scrutiny of Overseas Exchanges

This stringent registration requirement has deterred many major crypto exchanges from entering the Japanese market or led them to withdraw their services in recent years. The FSA has also been proactive in contacting prominent overseas platforms like Binance, instructing them to either cease soliciting Japanese users or apply for a license.

However, the financial watchdog has significantly ramped up its scrutiny of foreign crypto exchanges over the past year. In 2023 alone, the FSA has issued warnings to Bybit, MEXC Global, Bitget, and Bitforex for "providing cryptocurrency trading" to Japanese residents without registration.

Concerns Over LBank's Transparency and Operations

In its warning to LBank, the FSA expressed concerns about the exchange's lack of a verifiable address and an identified CEO. The regulator stated, "We have issued a warning today regarding unregistered cryptocurrency exchange operators in accordance with the administrative guidelines on […] cryptocurrency exchange operator relations. [LBank has] conducted cryptocurrency exchange business with Japanese residents via the internet."

Japan's Strict Crypto Regulations Born of Past Hacks

Japan's stringent approach to crypto regulation stems from several high-profile exchange hacks that have rocked the country, including the Mt. Gox collapse in 2014 and the Coincheck hack in 2018. The latter incident, in particular, prompted Tokyo to establish comprehensive regulations governing domestic crypto exchanges, which were among the first of their kind globally.

According to its website, LBank is headquartered in Indonesia and claims to have offices in multiple countries, including the United States, the UAE, the British Virgin Islands, Canada, Lithuania, and Australia. Launched in 2015, the exchange claims to support over 50 fiat currencies, including the Japanese yen.