Japan's financial market regulator is reportedly planning to issue its first ever refusal order to a business registration application filed by a domestic cryptocurrency exchange.

According to a Nikkei report on Tuesday, a trading platform called FSHO will likely see its registration application denied by the Financial Service Agency (FSA) due to its previous failures to comply with existing Japanese financial rules.

As reported by CoinDesk previously, although the FSA has allowed several crypto exchanges including FSHO to operate within the country in the absence of  full regulatory approval, the watchdog issued two suspension orders to the firm in March and April.

The reason for the actions, as explained by the FSA at the time, was that the platform had not implemented strict know-your-customer (KYC) procedures and subsequently failed to report suspicious transactions that might indicate money laundering.

Although the Nikkei report did not indicate when the denial order might be issued, the previous FSA notice indicates that the current suspension order extends until June 7.

"The Financial Services Agency will clarify its attitude towards rebuilding a healthy trading environment by denying a sloppy dealer," Nikkei said.

The reported FSA action, if true, would seemingly mark a toughening stance by the financial watchdog as it beefs up scrutiny of domestic crypto exchanges following the $530 million Coincheck hack that shocked the industry in January.

FSA image via Shutterstock