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Cryptocurrency Exchanges are Withdrawing From Markets in Asia Due to Increased Regulatory Measures

The regulatory measures introduced by various Asian countries in the previous months triggered the decision of some cryptocurrency exchanges to withdraw from those markets. Among the exchange platforms that decided to leave are some known names, such as Kraken, Binance and Bitfinex. Kraken decided to retire from the Japanese cryptocurrency market, Binance decided to leave the Hong Kong market and Bitfinex is leaving the market in China.

In a message published on the official website of Kraken, Jesse Powell, the CEO of the cryptocurrency exchange, explained that one of the reasons for their decision to leave the Japanese cryptocurrency market lies in the strict supervisions the company was subjected to, especially after the hacker attack on Coincheck at the beginning of this year. This is what Powell wrote on the official Kraken blog: “Ironically, after all the effort we put in to bringing about the VC Act in Japan, we decided to take a step back.  Kraken is Japan’s oldest surviving exchange and we led the industry in forming an SRO (JADA) and engaging with government but we failed to gain significant market share. Perhaps we focused too much on regulation and not enough on marketing.

We had been grandfathered in to operating in Japan with a VC Act application pending, however, the structure of our international business, broad token selection and extreme security measures added a lot of complexity that wasn’t shared by other applicants.  Additionally, because we were still under evaluation when another major Japanese exchange was hacked, the scrutiny on us intensified. It became a bit of a moving goalpost situation, also with high likelihood that we would be required to substantially reduce our token selection.

While Japan’s VC Act isn’t perfect, it is a good example of what (relatively) reasonable regulation can do for a country.  Huge, traditional financial services are rushing in to crypto. For them, certainty is everything and now they have it. Japan’s crypto market is sure to be highly competitive, which is a great thing for consumers.  I have to give the FSA in Japan a tremendous amount of credit for getting it together. They are a fine regulator to work with. Hopefully, Kraken will find an opportunity to re-enter the market in the near future.”

On the other hand, Bitfinex, the fifth largest cryptocurrency exchange in the world, could move its trading operations from Hong Kong to Switzerland, according to the information that appeared at the end of March this year. At the time, Jean-Louis van der Velde, the CEO of Bitfinex, said: “We are looking for a new home for Bitfinex and the parent company iFinex, where we want to merge the operations previously spread over several locations. We want to be the most transparent of all exchanges and meet the requirements of the Swiss regulator.” He added that Bitfinex was in talks with Swiss banks.

Bitfinex did not mention the regulations as the reason to withdraw from the market in Hong Kong, but some sources confirmed that the increased demands coming from the regulatory authorities in Hong Kong could have influenced the decision to leave. London was also one of the option for moving the business, but Switzerland seems like a more viable option, since the city of Zug in Switzerland is known as the crypto valley, and it is considered to be a paradise for tech startups working with the blockchain technology.

Back in February, the authorities in Hong Kong launched a public campaign whose goal was to inform the public about the risks associated with the cryptocurrencies and the initial coin offerings (ICOs).

Moreover, the Securities & Futures Commission of Hong Kong (SFC) prohibited the trade of various cryptocurrencies after they were catalogued as securities and Binance was one of the cryptocurrency exchanges that received a warning letter from the SFC.

In a pursuit of a more suitable environment for its business, Binance is moving its office to Malta, another country in Europe that is considered to be a paradise for the cryptocurrencies. The decision was made after the Financial Services Agency (FSA) of Japan accused the company of operating in the country without the necessary licenses.

Asia experienced a big boom of the cryptocurrencies and spectacular growth of the cryptocurrency ecosystem in many countries around the continent, but the regulations imposed by various countries are now slowing down the adoption of blockchain technology and the cryptocurrencies.

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