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Two company suspension orders along with three onsite reviews after, Japan has handed down its initial official rejection of a cryptocurrency exchange program.

Announced from Japan's financial regulator, the Financial Services Agency (FSA) on Thursday, the jurisdiction detained Yokohama-based FSHO of becoming a "company which hasn't established a method to correctly and reliably execute [services] from the digital currency market industry." Since a report suggested earlier this week, the movement has been anticipated.

Though FSHO first announced its application to enroll its own cryptocurrency market on September 26, 2017, the FSA disclosed its refusal order follows a lack of progress by the operator at improving its own operations under the FSA's evaluation that started in February with an onsite inspection of their firm.

The FSA, which started inspecting domestic trades after the $530 million hack on of Tokyo-based trade Coincheck in January, decided that FSHO lacked safety steps and failed to adhere to know-your-customer (KYC).

On March 8, the frozen FSHO's surgeries for a month along with a company improvement that especially demanded the market to boost its method of flagging suspicious transactions that may indicate money laundering, execute countermeasures against terrorism funding and apply trading strategies that affirm payments during trades in real time.

No Enhancements

The FSA ran a 2nd onsite review on March 23rd to test on enhancements and discovered none. "[T]he function associated with countermeasures [of money laundering and terrorist funding ] wasn't enhanced," the jurisdiction ascertained, suspending FSHO for a further two months. The market operator was slapped with its next business development order and has been advised to execute a"radical reform of management strategy, compliance with all regulations and laws [and] a suitable business performance."

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On the other hand, the FSA accused the former management team of "substantially controlling" the business in projects and decisions which were"extremely crucial concerning management" without getting the permission of the recently established group that comprised a manager and president.

The attorneys and auditors who delegated internal clauses resigned shortly afterward, the FSA added.

"In this manner, the business hasn't reformed or assembled the management system and hasn't implemented a business improvement order issued April 6, such rather than setting a system to execute internal audits, and the direction it's termed the management system hasn't yet been developed," the operator stated.