Japan's Financial Services Agency (FSA) has called on cryptocurrency exchanges to implement withdrawal delays and other protective measures as authorities confront increasingly sophisticated scams targeting digital asset users.

On Thursday, the FSA announced that it had submitted the request jointly with the National Police Agency. The move comes in response to mounting losses among crypto exchange customers and a rising number of cases in which fraudulently obtained funds are being funneled into exchange accounts. Japan maintains one of the world's more established crypto regulatory frameworks, having introduced a licensing regime for exchanges following the 2014 collapse of the Mt. Gox exchange, and the latest measures build on that consumer-protection foundation.

The request was directed to the Japan Virtual and Crypto Assets Exchange Association (JVCEA), the country's self-regulatory organization for crypto trading platforms. It outlines several proposed safeguards:

• Withdrawal delays: Exchanges are asked to restrict cryptocurrency withdrawals for a defined period after a customer deposits fiat currency or purchases digital assets.
• Pre-registered withdrawal addresses: Users would be required to register withdrawal addresses in advance, with a mandatory waiting period before newly added addresses become usable.
• Customer-specific withdrawal limits: Platforms should set individualized caps on withdrawal amounts.
• Enhanced monitoring: Stronger oversight of transactions and the access environment is recommended.
• Phishing-resistant multifactor authentication: Exchanges should adopt more robust authentication methods.
• Remitter name verification: Checks should be in place to confirm that the name of a bank remitter matches the name of the crypto account holder.

The FSA emphasized that these measures are not binding regulations. The agency stated that exchanges should determine how to implement the recommendations based on their individual operations, services, and level of exposure to misuse. The non-binding nature of the request is consistent with Japan's approach of using the JVCEA as a self-regulatory body to establish guidelines that exchanges are expected to adopt on an industry-coordinated basis.

The joint request reflects growing concern among Japanese authorities over the misuse of exchange accounts in fraudulent schemes and underscores efforts to strengthen protections for crypto users. The proposed safeguards, particularly pre-registered withdrawal addresses and remitter name verification, mirror anti-fraud mechanisms that have been adopted or considered by financial regulators in other jurisdictions addressing similar patterns of scams that exploit the speed and irreversibility of cryptocurrency transfers.

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