Gate.io, the opular cryptocurrency exchange announced that it will cease all services in Japan, effective immediately.
This decision is part of an effort to comply with local regulations and guide users towards legally compliant trading platforms.
Japan likes crypto, but there are rules
Gate.io’s relationship with Japan was pretty complicated. The exchange attracted many Japanese traders by offering high leverage of over 100 times, which promised higher returns.
Next to this Gate.io maintained a so-called zero-cut system, which protects users from negative balances caused by market fluctuations. This is very, very appealing when someone speculating big time.
But Gate.io wasn’t licensed by the Japanese Financial Services Agency, which is a legal requirement for operating in Japan.
Despite the lack of licences, the exchange continued to serve Japanese users since there were no laws explicitly prohibiting residents from using overseas exchanges.
This meant that Japanese traders were taking a risk, as Gate.io wasn’t under FSA oversight.
The FSA mandates that exchanges must register and comply with specific regulations, including a leverage limit of 25 times, much lower than what Gate.io offered.
Roundabout ways
Gate.io managed to avoid direct conflict with the FSA by not actively marketing to Japanese users and simply providing a Japanese version of its website.
Unlike other major exchanges, Gate.io didn’t establish a local entity in Japan, likely because in this way they don’t need to register.
Other exchanges like Binance and Coinbase have faced similar regulatory issues and have either left Japan or made changes to comply, and operating in the country.
The industry is changing
Binance exited Japan in 2022 following a warning but later re-entered the market by acquiring a local exchange.
Coinbase also withdrew last year after receiving regulatory warnings. BitMEX left Japan in 2020 for the same reasons.
Numerous experts think Gate.io’s exit might lead to increased scrutiny on other overseas exchanges operating without proper licensing in Japan.
This move shows the importance of regulatory compliance in the cryptocurrency industry, and users may now seek out platforms that fully comply with local regulations to ensure their investments are secure.
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