Japan’s Financial Services Agency (FSA) has barred a crypto exchange from receiving an operating license for the first time, Nikkei Asian Review reports Tuesday, June 5.

The regulator has now chosen to permanently deny registration to Yokohama-based FSHO, whose services were already suspended twice by the FSA this spring, over concerns the exchange operator did not sufficiently verify the identity of customers in cases of suspect transactions.

The FSA has now reportedly concluded that FSHO lacks “the necessary systems to operate its business.”

FSHO is one of only two crypto exchanges in Japan to have received two consecutive punishment notices from the FSA, the other being Coincheck, whose unprecedented $532 mln hack in January remains the biggest confirmed crypto theft in the industry’s history.

By barring an exchange whose practices it considers unacceptable, the financial watchdog appears to be making good on its intent to clean-up Japan’s crypto industry, in the wake of both Coincheck and the notorious collapse of Tokyo-based Mt. Gox back in 2014.

Since April 2017, Japan’s Payment Services Act has required all crypto exchanges to be registered under an FSA license, with the first licenses being approved in September. This May, the regulator yet further toughened its license stipulations, placing an emphasis on AML and KYC compliance, and banning the trading of anonymity-oriented altcoins, such as Dash (DASH) and Monero (XMR).

Nonetheless, the country continues to show exceptional crypto adoption levels. The FSA’s data from 17 domestic crypto exchanges found that as of the end of March 2018, there were at least 3.5 mln crypto traders in the country. Figures from CryptoCompare indicate that the Japanese Yen accounts for a staggering 59% of global Bitcoin trades as of press time.

This makes it an attractive market for foreign capital, with leading US crypto exchange Coinbase this week revealing its plans to expand its services to Japan “within the year.” This month, Japanese crypto exchange BitTrade was bought for $50 mln by a Singaporean entrepreneur, who became the first foreign investor to hold a 100 percent stake in an FSA-licensed trading platform.

A leading Japanese fintech company has also recently announced it would be launching a crypto asset exchange within the year.