Japan’s Financial Services Agency (FSA) has formally urged cryptocurrency exchanges to introduce new measures aimed at preventing scams and unauthorized transfers. The call for action, delivered in coordination with the National Police Agency, comes amid a noticeable increase in criminal activities exploiting crypto exchange accounts.
Proposed safeguards for withdrawals
The FSA has requested that crypto exchanges implement waiting periods on withdrawals following fiat deposits or digital asset purchases. In addition to these delays, the agency recommends that customers pre-register their withdrawal addresses, making it necessary to wait before a new address can be used. Officials believe these changes could create a buffer period, which would enable platforms to flag and halt suspicious transactions before funds leave the exchange.
Exchanges have also been advised to set individual withdrawal limits based on the customer’s account history, taking into account transaction behavior rather than applying uniform caps to all users. Authorities suggest that these adjustments could significantly reduce the speed and frequency with which scammers operate.
The regulatory guidance has been submitted directly to the Japan Virtual and Crypto Assets Exchange Association, the country’s self-regulatory body overseeing digital asset trading platforms.
The FSA’s recommendations focus on slowing down fraudulent transfers and strengthening safeguards in order to protect investors and block illicit outflows linked to scams.
Enhanced security and identity checks
As part of the proposed reforms, the FSA is encouraging exchanges to monitor transaction flows and user login activity for signs of fraud. This involves reviewing accounts for unusual behavior that could point to unauthorized access or attempts at account takeovers.
The agency is also promoting the adoption of multifactor authentication, particularly solutions that resist phishing attempts and unauthorized access, as a way to bolster platform security. Apart from login enhancements, exchanges are asked to verify that the name of a bank sender matches that associated with the linked crypto account, aiming to prevent money from being laundered through mismatched identities.
These recommendations stem from a broader effort to address rising losses from fraudulent schemes funneled through Japanese crypto exchanges. Coordination between the FSA and the National Police Agency highlights the multi-agency approach to combating financial crime in the digital asset sector.
Application left to exchanges
Despite the measures outlined in the request, the FSA is not mandating compliance. Instead, each exchange will be responsible for assessing its risk exposure and implementing steps as it sees fit. Some may choose to adopt the guidance in full, while others might take a more selective approach depending on their operational risk and customer base.
This flexibility reflects ongoing efforts in the financial industry to balance regulatory oversight with operational autonomy. As exchanges consider these safeguards, market participants are watching to see how platforms will respond in the weeks ahead.
In light of regulators’ emphasis on enhanced monitoring and technical solutions, some platforms are already exploring technology that bridges traditional finance and the blockchain. 1stepSwap, for example, enables users to access tokenized real-world assets such as U.S. company shares and commodities like gold and silver directly from their crypto wallet, without complex intermediaries. The platform aggregates the best market rates in real time, allowing investors to diversify portfolios and execute trades efficiently.
As of Thursday, there have been no official public responses from Japanese exchanges regarding the FSA’s request. The agency has pledged to continue monitoring the sector and assess the impact and adoption of these recommendations in the coming months.
Officials point to a pattern of fraud in which stolen funds are quickly sent through exchange accounts, contributing to rising financial losses from scams.
