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Coinbase Says Japan's Cryptocurrency Scrutiny 'good For Us'

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U.S. cryptocurrency exchange Coinbase, which awaits an operating license in Japan, remarked that the ongoing cryptocurrency crackdown in the country will give it an advantage due to its stricter stance on security. The exchange expressed confidence that it will win regulatory approval in 2019.

Coinbase chief policy officer Mike Lempres, in an interview with Nikkei Asian Review, said that talks for obtaining the license are going well with the country's financial regulator.

About investor safeguards, he said 99 percent of funds are stored offline, with only 1 percent held in hot wallets, which are accounts that are connected to the internet. That 1 percent is fully insured, he noted.

According to him, the concerned issues include whether the FSA will require the exchange's system to be managed in Japan, which would improve the FSA's ability to monitor transactions. However, Coinbase sees that as an additional security risk.

"We have everything built to protect our storage in the U.S. We won't do anything to even raise possibility of a hack. It would be hard for us to duplicate what we do in the U.S. today in Japan and other countries," he noted.

For long, Japan has been considered a cryptocurrency haven. However, the $532-million hack of domestic crypto exchange Coincheck in January as well as a series of other high-profile thefts have resulted in stricter scrutiny by Japan's Financial Services Authority or FSA into crypto dealings.

Recently, the regulator announced plans to apply more rigorous oversight of applications from exchanges for official licenses.

The FSA previously had allowed unregistered crypto exchanges to operate while they await approval. However, it has not approved registration of new cryptocurrency exchange since December 2017.

Many exchanges have shifted to other countries or were sold. Around 160 companies are estimated to have applied for a license.

Coinbase, with 20 million accounts, in June announced that it would enter Japan, and also appointed a managing director.

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