In news that could explain part of Bitcoin's recent drop,  Japan just shuttered 2 cryptocurrency exchanges and issued "punishment notices" to 7 more for a variety of violations ranging from security infractions to failure to properly follow money laundering regulations.

The two exchanges that are to be closed for a one month period are "Bitstation" and "FSHO", neither of which I have any knowledge about beyond a (very) passing familiarity with their namesake. I suspect this will not be the event to set their destinies aflame.

<center>![Japan 1.png](https://steemitimages.com/DQmY1P1cnH2boz5MYEHA4ovhx9rCgDPJ1ajTSyKA4mZMN7u/Japan%201.png)</center>

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These actions were the result of inspections having been conducted on the security practices of all Japanese cryptocurrency exchanges after "Coincheck", another Japanese exchange, was hacked in January resulting in the theft of approximately$500 million in and froze all user withdrawals. Apparently the relevant coins were being held in a hot-wallet (derp) by the exchange, so their inability to avoid a citation for mishandling security procedures was not unexpected.

<center>![Japan 2.png](https://steemitimages.com/DQmcvNkoSQrh6qjtFWL6rm6UJscjqMATzVwG2zMh7VvNuEh/Japan%202.png)</center>

<center>*As you can see above, Bitcoin is having a rough day on this news.*</center>

It's actually a relief that one of the more stable of modern governments is actually conducting security audits on exchanges to reveal vulnerabilities, as there is not a great deal of short-term profit motive for exchanges to do this on their own. Given the infancy of this entire industry and the lack of regulation, many exchanges are no doubt taking a "don't ask, don't tell" approach to their security measures which is quite terrible for the average consumer. That's how you end up with Mt Gox.

Unfortunately, at least on of the things exchanges were cited for (including Coincheck) was "the proper and required internal control systems" - or, in simpler terms, problems relating to Know Your Customer laws and the prevention of money laundering. I'm sure tax evasion is also on their list, so generally speaking, not something the end user has reason to be too enthused about.

The severity of the drop on this news breaking was bad, but it could have been much worse. There is speculation that some players were forewarned about this development, explaining some of the more severe drop from several days ago. Since no evidence has been offered in support of this theory, and these sorts of predictions are never in short supply, I can only conclude that while likely true in some small degree, there is no way to prove any correlation with the currently available data.

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*Copyright: CoinTelegraph, @anahowa210*