Bitcoin tumbles after Japan watchdog orders exchanges to review business practices

Bitcoin prices fell more than 5 percent on Friday after Japan’s financial regulator ordered several cryptocurrency exchanges to improve their practices against money laundering.

The digital currency traded at $6,349 as of 7:45 a.m. ET, breaking below $6,400 for the first time in about a week, according to CoinDesk.

The order from Japan’s Financial Services Agency led bitFlyer — the largest crypto exchange in the country— to suspend the creation of new accounts while it makes improvements to its business, especially in its measures to stop money laundering and terrorist financing.

“Our management and all employees are united in our understanding of how serious these issues are, as well as how serious we are in responding to them going forward,” bitFlyer said in a statement on their website.

Bitcoin’s Friday performance

Source: CoinDesk

“In order to maximize our efforts towards building a suitable service and improving on the issues identified, we have temporarily suspended account creation for new customers of our own volition,” bitFlyer said.

The agency gave the same order to five other other exchanges after finding weaknesses in their anti-money-laundering controls.

“In the long-term, it builds a better ecosystem and makes sure this is a legitimate asset class,” said Brian Kelly, founder and CEO of BKCM.”This is part of making sure exchanges are up to snuff.”

In the short run though, Kelly pointed out that it reduces the flow of new capital to the largest exchange, in the largest market for Bitcoin trading. Bitcoin trading in Japanese yen makes up more than 60 percent of the digital currency’s daily volume, according to data from CryptoCompare.

Bitcoin has suffered from a lack of new buyers in 2018. The entire market capitalization of the digital currency has fallen by roughly 50 percent since January, according to data from CoinMarketCap.com. Bitcoin prices have dropped by more than half this year, after climbing to a high near $20,000 in December.

Japanese regulators have been in the vanguard of regulation. It was the first country to adopt a national system to regulate cryptocurrency trading after its exchanges were subject to some well-known breaches including Mt.Gox.

In March, Japanese regulators issued punishment notices to multiple exchanges and forced some to stop business altogether after the $530 million theft of digital currency from exchange Coincheck andissued a warning to Hong Kong-based Binance for operating in the country without a license.

—Reuters contributed to this report.

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