Japan Tightens Grip on Cryptocurrency Exchange Market
Japan is one of the biggest crypto markets in the world and this comes with a lot of negative sides
Japanese crypto exchanges have become a beacon for hackers from all over the world who have already raided the market repeatedly.
Another nail in the coffin
In the most recent hack attack, Coincheck, an exchange based in Tokyo, suffered a massive loss of NEM coins that amounts to JPY 58 billion (USD 534 million). One of the factors that facilitated the theft was that Coincheck used a hot wallet to store its NEM coins instead of the more secure cold wallet that would have kept the coins offline. Another thing that might have prevented the event is that Coincheck does not use a multi-signature system layer of security.
This is one of the biggest cryptocurrency thefts in history and it has naturally provoked a strong reaction from the country’s Financial Services Agency (FSA).
FSA is about to inspect all cryptocurrency exchanges in the country and it has also made it clear that Coincheck will have to make rapid improvements in their operations. Coincheck is to submit an incident report and an action plan that will prevent this from happening again by February 13. This theft and the consequent efforts of regulating the exchanges only serve to pinpoint the risk of trading and investing in this asset.
As a result of all of this, Coincheck has limited trading of cryptocurrencies only to Bitcoin. It has also vowed to refund 90% of its clients’ losses, using internal funds in a yet undisclosed manner.
The FSA is still to confirm if Coincheck can afford to cover its clients’ losses. Researcher Makoto Sakuma claims that if Coincheck fails to improve and deal with this crisis in the right way, it will be a heavy blow to the crypto upsurge in Japan.
NEM value has been unstable ever since the theft. Initially, it fell to USD 0.78 (from USD 1.01), but it has recently regained some of its value and risen up to USD 0.97.
In a continuation of the April 2017 decision that all Japanese cryptocurrency exchange operators should register with the government, the FSA has now registered 16 exchanges, with 16 more awaiting registration. Coincheck submitted their application in September.
The NEM Foundation, based in Singapore, said it has a tracing system in place in its blockchain that allows it to know the location of all NEM coins. Even though the hacker never moved the coins to a personal account or to any other exchanges, the NEM Foundation is helpless as far as returning the coins to Coincheck goes.
There is now a history of cryptocurrency exchanges being forced to shut down because of hacker attacks. Mt. Gox used to operate 80% of all Bitcoin trades in the world before losing half a billion dollars worth of Bitcoin. Youbit, an exchange from South Korea, also filed for bankruptcy after suffering two hack attacks last year. Coincheck’s future remains unclear.
Instead of following the global trend of suspending the anonymous use of cryptocurrency trading accounts, Japan has decided to try and regulate the exchanges on a national level in an attempt to protect its own economic interests.
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