LBank in hot water for breaking Japan’s financial rules

by

As a seasoned crypto investor, I have witnessed firsthand the importance of regulatory compliance in this rapidly evolving industry. The latest warning issued by Japan’s Financial Services Agency (FSA) to LBank, an unregistered cryptocurrency exchange operating without proper registration, is a stark reminder of the potential risks that come with investing in non-compliant platforms.

LBank was issued a strict caution by Japan’s financial regulatory body due to unregistered transaction activities.

The Financial Services Agency of Japan, as reported by Coinpost, pointed out that a particular cryptocurrency exchange was functioning using an unidentified email address and an unnamed representative. This revelation has sparked serious doubts regarding the exchange’s transparency and responsibility.

The Japanese Financial Services Agency cautioned LBank Exchange on June 14th, as per CoinPost’s report, stating that the platform was not authorized to facilitate cryptocurrency transactions. Previously, in March of the previous year, the agency had given similar warnings to Bybit, MEXC, Bitget, and Bitforex.

— Wu Blockchain (@WuBlockchain) June 15, 2024

It’s been reported that this exchange allegedly enabled crypto transactions with Japanese citizens over the internet, contravening Japan’s regulatory guidelines.

Established in 2015 and headquartered in the British Virgin Islands, LBank is a well-established centralized cryptocurrency exchange. With a comprehensive offering, it lists 671 different coins and facilitates trading among 814 distinct pairs. According to CoinGecko’s latest data, LBank presently holds the #55 position in terms of daily spot trading volume.

A cautionary notice for the crypto exchange emerged mere weeks following its extravagant web3 investor summit in Dubai, starkly illustrating the gap between international marketing initiatives and adherence to regulations.

Historical warnings

As a financial analyst, I’ve reviewed the recent warning from the Financial Services Agency (FSA) towards LBank, and I must admit that this isn’t the first time such an accusation has come their way. Back in March 2023, the FSA had raised concerns against four other crypto exchanges: Bybit, MEXC, Bitget, and Bitforex. The common thread among these platforms was their failure to register with the agency while continuing to provide trading services to Japanese residents.

According to recent data from CoinGecko, Bitget and Bybit are two of the most popular cryptocurrency exchanges worldwide. The number of visitors each exchange attracted over the past thirty days places Bitget third and Bybit fourth on the list.

Bybit has gained prominence for derivative trading and boasts a large following in Japan. However, Japanese traders are unable to access these platforms because of regulatory limitations.

Comparing regulatory landscapes

As a financial analyst, I would put it this way: From my perspective, when it comes to regulating cryptocurrencies, Japan and the United States adopt distinctly different approaches. In Japan, cryptocurrencies are considered legal property under the Payment Services Act (PSA). This means that they are recognized and protected by law in much the same way as traditional assets such as stocks or real estate.

Crypto exchanges are required to comply with regulations by registering with the Financial Services Authority (FSA) and observing anti-money laundering (AML) and counter-terrorism financing (CTF) directives.

In Japan, the classification of cryptocurrencies differs from that of ICO tokens. While most cryptocurrencies are considered assets, ICO tokens fall under the category of type 2 securities and are subject to regulation according to the Financial Instruments and Exchange Act (FIEA).

As a crypto investor, I’ve noticed that the regulatory landscape in the U.S. is more complex and dynamic compared to other countries. In 2022, the Biden administration took action with an executive order to examine the pros and cons of digital currencies, which ultimately paved the way for stricter regulations. This means that we, as investors, should stay informed about the evolving regulatory environment in order to make informed decisions regarding our investments.

As a researcher, I’ve come across a recent development where the White House opposed a bill passed by the House of Representatives aiming to revoke a controversial SEC bulletin regarding custodial services for crypto assets. Several legislators believed that this SEC directive could pose significant challenges for businesses looking to provide custody solutions in the digital asset sector.

The Securities and Exchange Commission (SEC) has taken a assertive stance, classifying numerous cryptocurrencies as securities and taking enforcement actions against non-compliant crypto businesses. Notably, in 2023, a court decision declared that Ripple‘s selling of XRP was considered securities sales only when made to institutions, but not on digital exchanges, resulting in a subtle victory for the cryptocurrency industry.

As an analyst, I would describe it this way: I’ve observed that both Japan and the United States are making significant strides in enhancing their regulatory frameworks. Japan, in particular, is taking a methodical and transparent approach to refining its regulations. On the other hand, the U.S. is grappling with ongoing debates surrounding legal and regulatory issues, making for a more complex process.

Read More

2024-06-15 17:50