LBank in trouble for breaking Japan’s financial rules

LBank has received a stern warning from Japan’s Financial Supervisory Authority for allegedly carrying out transactions without proper registration.

This was reported by the Japan Financial Services Agency (FSA). TO Coinpost, pointed out that the cryptocurrency exchange was operating under an “unknown address” and an “unknown representative,” raising significant concerns about transparency and accountability.

The exchange reportedly facilitated cryptocurrency transactions with Japanese residents through the Internet, which is in direct violation of the Japanese regulatory framework.

LBank is a centralized cryptocurrency exchange founded in 2015 and registered in the British Virgin Islands. The platform supports 671 coins and 814 trading pairs. Data from CoinGecko Shows that LBank currently ranks 55th in terms of 24-hour spot trading volume.

The warning to the cryptocurrency exchange came a few weeks later hosted a high-profile web3 investor meeting in Dubai, which highlighted the disconnect between global outreach efforts and regulatory compliance.

Historical warnings

This latest warning to LBank is not the first time the FSA has pointed an accusatory finger at cryptocurrency exchanges operating in the country. In March 2023, the agency issued similar warnings to four other companies: Bybit, MEXC, Bitget, and Bitforex. These exchanges were also found to offer cryptocurrency trading services to Japanese residents without registration.

Market data from CoinGecko shows that Bitget and Bybit are among the top exchanges globally, ranking third and fourth, respectively, in terms of the number of visitors each has received in the last 30 days.

Cryptocurrency Exchange Rankings by Monthly Visits | Source: CoinGecko

Bybit is particularly popular for derivatives trading and enjoys a significant user base in Japan. Despite their popularity, these platforms remain inaccessible to Japanese traders due to regulatory restrictions.

Comparison between regulatory scenarios

Japan and the United States offer contrasting approaches to cryptocurrency regulation. Japan, under the Payment Services Act (PSA), recognizes cryptocurrencies as legal property.

However, cryptocurrency exchanges must register with the FSA and adhere to anti-money laundering (AML) and counter-financing of terrorism (CFT) guidelines.

Furthermore, in Japan, most cryptocurrencies are treated as assets, while Initial Coin Offering (ICO) tokens are classified as Type 2 securities, regulated by the Financial Instruments and Exchange Act (FIEA).

In contrast, the US regulatory framework is more fragmented and evolving. In 2022, President Joe Biden’s administration took significant steps, initiating an executive order to evaluate the risks and benefits of cryptocurrencies, which led to a roadmap that encourages greater regulatory enforcement.

However, recently, the White House vetoed a bill in the House of Representatives that would have repealed a controversial U.S. Securities and Exchange Commission (SEC) bulletin, which many lawmakers believed could pose a major obstacle to companies offering cryptocurrency custody services.

The SEC has been proactive, treating many cryptocurrencies as securities and pursuing lawsuits against non-compliant crypto firms. A notable development was the 2023 court ruling that Ripple’s sale of XRP was titles only when sold to institutions, not exchanges, which marked a narrow victory for the cryptocurrency industry.

Both Japan and the United States are actively refining their regulatory policies, with Japan leading a structured and clear approach while the United States navigates ongoing legal and regulatory debates.

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