Amid the scenario that Asia is becoming a less attractive market for large cryptocurrency exchange operators due to regulatory uncertainties.
As of posting, at least three major exchanges have announced or voiced the idea of fleeing the region.
One of the exchanges that announced “breakup” with Asia was Kraken, a San Francisco-based exchange, in April announced that it will stop offering its services to residents of Japan.
The exchange will cease accepting deposits from the country, one of the biggest markets for digital coin trading, around the middle of this month. Trading for existing clients in Japan will be halted in mid-June, and these customers must withdraw their funds by the end of that month.
It can be remembered that Kraken forayed into the market in October 2014.
Last month, the company said “it is impractical to continue service for Japan residents.” The decision to leave involved “careful consideration of revenue against the costs and resources required to maintain service,”it said.
The world’s 13th largest exchange did not go into detail about why it is pulling out of Japan, but revenue does not seem to be the problem. The price of bitcoin, the most popular cryptocurrency, now hovers around $9,000, less than a half of the historical high it reached in December.
But bitcoin’s daily trading volume, which is what matters to exchanges, has not taken a corresponding drop.
The market suspects that the costs of complying with new regulations in Japan is the main reason for Kraken’s departure.
Japan’s cryptocurrency community received a shock in January when Coincheck suffered a record hack, losing $530 million worth of clients’ NEM tokens.
The theft put Coincheck in the headlines, where it stays to this day. Later in January, Japanese regulators strengthened their grip on cryptocurrency exchanges. On April 16, Monex Group, which holds more established online brokerages, bought Coincheck for $33 million. Later in April, Coincheck announced that it made an operating profit of $491 million for the fiscal year through March — despite compensating its users to the tune of 47.3 billion yen ($432 million) for the NEM hack.
As Japanese regulators began coming down hard on the industry, the country’s commercial cryptocurrency exchanges launched a self-regulatory body to regain the confidence of traders.
Although Coincheck’s profit shows cryptocurrency exchanges can be high-margin, the costs of running them in Japan is becoming onerous.
“Suspending services for Japan residents will allow us to better focus on our resources to improve in other geographical areas,” Kraken said. “After we have had a chance to better catch to our rapid growth, we will consider the possibility of resuming service for Japan residents.”