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Crypto Exchange Changelly Confirms It Can Steal Users’ Monero (XMR)

Changelly Can Withhold XMR If KYC Isn’t Completed 

Privacy coins, such as Monero (XMR), ZCash (ZEC), Horizen (ZEN), are often the topic of controversy within the cryptocurrency community, as some naysayers claim that these assets directly enable money laundering, terrorist financing and the like. Although this may be true in rare, fringe cases, these critics fail to remember that a good majority of privacy coin-enabled transactions are likely made with good intentions.

Regardless, Changelly, a Prague-based ‘instant’ cryptocurrency exchange, has recently sought to restrict

Monero (XMR) trading on its platform, even though it has natively supported the privacy coin for months, if not years.

For individuals looking for near-instant crypto-to-crypto transactions, Changelly is undoubtedly one of the best places to go-to, but for those looking to trade their assets into Monero specifically, using the service may pose a bigger problem. Over the past few months, a multitude of users have taken to Reddit to claim that Changelly withheld hundreds of Monero due to “high risk” KYC concerns.

As reported by The Next Web, a Changelly representative has since confirmed that the service is allowed to have a finger over the trigger, which allows the exchange to withhold “suspicious transactions” that involve Monero. He/she wrote:

To all Monero community, our risk management system doesn’t mark all transactions out of the blue… Monero is the crypto that hides a sender and recipient thus making transactions untraceable. This [is] a reason why big amounts of other currency got to be checked [sic] before [it’s] converted to XMR.

The spokesperson went on to add that Changelly does not inherently hate users who use XMR but will restrict transactions in accordance with its rather strict KYC procedure, as fears of money laundering run rampant within global regulatory bodies. The company representative also added that as soon as the proper KYC protocol is fulfilled, the funds will immediately be released to the predesignated consumer-owned address, and the said user would even be whitelisted to avoid such an occurrence from happening again.

On the other hand, however, it was unfortunately revealed that if the submitted KYC documents are not up to par, Changelly retains to right to keep all of the withheld cryptocurrencies for an undisclosed period of time.

Regulators And Privacy Cryptos — Not A Good Combo

As reported by Ethereum World News in mid-May, Japan has taken a risk-averse stance towards privacy cryptocurrencies, with regulators within the country requiring local exchanges to delist Monero, Dash, ZCash, and other anonymous blockchain-backed assets or face delicensing.

For now, Japan is the only ‘big name’ country to have made a move against privacy-centric digital assets, but many believe that it won’t stay that way for long, with pessimists speculating that countries around the globe will eventually make their move against this subindustry.

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Japanese Regulators Clamp Down On Prospective Crypto Exchanges

Japanese Regulators Introduce New Measures To Protect Consumers

Japan has long been at the forefront of the cryptocurrency/blockchain industry, with innovators and forward-thinkers within the country quickly adopting and developing crypto assets and similar technologies. And although many Japanese citizens see eye-to-eye with cryptocurrencies, regulatory bodies across the country have taken a cautious stance, doing their best to protect consumers from scams, hacks and the like.

As per a report from The Japan Times, a Tokyo-based publication, the country’s Financial Services Agency (FSA) has recently clamped down on one of the most important aspects of this industry — exchanges.

The FSA, which is essentially the Japanese equivalent of the US’ SEC, has tightened the registration process for upcoming crypto exchanges, insiders tell The Japan Times. More specifically, the regulatory body is doing its best to ensure that said exchanges are utilizing the proper risk management and mitigation techniques, methods, and systems. The revised registration screening rules are reportedly an update to Japan’s Payment Services Act, which was instated in April 2017 to protect the average cryptocurrency consumer from financial risk.

Those familiar with the matter noted that the revised act will require each crypto exchange license applicant to answer upwards of 400 questions, or a four-fold increase in potential questions. The Japanese news source elaborated, writing:

The state watchdog has increased the number of questions asked when screening applications to about 400 items, up fourfold, sources said Saturday.

Along with the bolstering of the regulatory questionnaire, the FSA added one more hoop for exchanges to jump through, with the revised act now requiring applicants to submit board meeting minutes. It was noted that via the minutes, the regulatory body intends to certify that there are proper measures in place to “sustain the company’s financial health and ensure the security of its computer system.”

The sources later added that this move to garner these minutes is not only to ensure security, but to also confirm that company executives are legitimately involved in the decision-making process of an exchange’s operations.

The updated screening process will also include a regular review of a crypto exchange’s primary shareholders, to “examine if an internal system is in place to check for links to antisocial groups.”

Unfortunately, analysts expect for this new regulatory move to hamper the development of Japan-based exchanges, as the stricter rules may cause the over 100 prospective exchanges to drop their applications ‘tout suite’.

It is clear that the FSA still has the $538M hack of the Japan-based CoinCheck fresh in their minds, as it is apparent that this move, along with a series of recent regulatory restrictions, is directed at mitigating the future risk of hacks and the subsequent loss of consumer-owned funds.

Regardless, as reported by Ethereum World News last week, Toshihide Endo, a commissioner at the FSA, stated:

We have no intention to curb (the crypto industry) excessively,” he said. “We would like to see it grow under appropriate regulation.

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There are no Plans to Curb the Japanese Cryptocurrency Market, Says FSA Commissioner

The commissioner of Japan’s Financial Services Agency (FSA), Toshihide Endo has declared that the regulatory body prefers to pursue a more measured approach to regulating the country’s cryptocurrency space. The FSA has taken strict measures against defaulting virtual currency bourses in Japan after the January Coincheck hack saga.

A Measured Approach to Cryptocurrency Regulations

Speaking in an interview with Reuters, the FSA commissioner promised more moderate regulations. He said that his agency would strive to find ways of adequately regulating the digital currency market in the country. According to Endo, the Agency wishes to develop a regulatory framework that balances the need to protect consumers while not at the same time, stifling the growth of the industry.

Commenting on the matter, Endo said:

We have no intention to curb (the crypto industry) excessively,” he said. “We would like to see it grow under appropriate regulation.

Endo’s comments came as part of a wide-ranging interview session where the FSA chief spoke about numerous aspects of the Japanese financial space.

Post-Coincheck Cryptocurrency Space in Japan

The Japanese cryptocurrency industry has come under increased levels of scrutiny in the aftermath of the Coincheck hack. In January 2018, Coincheck – a prominent exchange platform at the time suffered a devastating cyber-attack. Hackers stole more than half a billion U.S. dollars in NEM tokens.

After the Coincheck hack, the FSA increased its oversight activities over the exchange platforms in the country. A thorough investigation by the agency unearthed alleged sloppy practices on the part of these platforms. According to the FSA, many of these cryptocurrency exchanges lack robust internal anti-money laundering (AML) protocols, as well as inadequate security infrastructure.

Since then, many platforms have suffered run-ins with the Agency including Binance which contributed to the exchange behemoth orchestrating a move to Malta. The FSA had already pioneered the idea of a national cryptocurrency exchange regulatory framework in 2017, making Japan the first country to have such a structured government oversight of the nascent industry.

In April 2017, the FSA passed a revised services payment code which the agency mandates all platforms to obey. The code which in effect recognized Bitcoin as legal tender also established defined operational provisions for cryptocurrency exchange platforms.

What do you make of FSA Commissioner – Toshihide Endo’s assurance of a more measured approach to cryptocurrency regulations in Japan? Keep the conversation going in the comment section below.

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Japanese Cryptocurrency Association Addresses Leverage Trading Concerns

Margin trading is a controversial topic in the cryptocurrency community, to say the least. Some think that using leverage in cryptocurrency trades is a valid trading vehicle, while others see it as speculative nonsense and an unwarranted method of trading that is risky for common consumers.

For the uninitiated, margin trading allows you to borrow boat-loads of money from an exchange or platform to utilize in trades. While this may sound a great investment opportunity to some, margin trading can rapidly magnify a user’s gains or losses, with some unfortunate traders losing their life savings on high margin trades.

As per a report from the Nikkei Asian Review, a leading English news outlet on Asian business-related news, Japan’s leading cryptocurrency self-regulatory body is moving to limit margin trading in the country.

The so-called “Japan Virtual Currency Exchange Association” (JVCEA) recently proposed a ruleset which would see a 4-to-1 leverage cap placed on margin-supported exchanges, which means that investors would only be able to borrow up to four times the value of their deposited funds.

In their present condition, exchanges can permit up to 25x leverage for traders, which is Japan’s current limit for this form of trading. As the local news source points out, a 4% drop in a 25x leverage trade would decimate a trader’s entire deposit, reducing the funds he or she had to zero.

For naive traders looking to turn a quick profit, the 25x leverage option is usually the place to go. However, for a wide majority of this variant of traders, this level of leverage is often too much for these individuals to handle.

However, it was noted that the self-regulatory board may allow specific exchanges to surpass the 4-to-1 limit if certain expectations and conditions are met. One of these conditions will be the implementation of an automatic stop-loss system, which would limit the magnitudes of risk a user could take.

If these rules are agreed on, the JVCEA will be set to implement the aforementioned rules over the upcoming year, giving exchanges an ample amount of time to adjust to this drastic change.

Crypto Regulation In Japan Remains A Hot Topic

Cryptocurrency-related regulation became the talk of the town in Japan following the devasting hack of the Coincheck exchange. As was reported by Ethereum World News, CoinCheck, one of the foremost Japanese exchanges, was victim to a ~$550 million hot-wallet hack in January.

Despite the exchange eventually reimbursing customers affected by the cyber attack, Japanese regulators felt it necessary to tackle the issue head-on. In the months following the CoinCheck debacle, the Japanese Financial Services Agency (FSA) began to propose and impose a vast array of rules that limited how exchanges could operate.

Some notable rules imposed on exchanges include the ban on the trading of privacy-centric cryptocurrencies, mandatory KYC/AML practices, cold storage requirements, and increased monitoring for cases of money laundering and terrorist financing.

It is likely that the FSA’s hard-lined approach to regulating cryptocurrencies will only continue moving into the future, as Japan continues to be a crypto capital of the world.

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