Coincheck is a Japan based cryptocurrency exchange that was launched in 2014 by Koichiro Wada, who remains the company’s CEO, and Yusuke Otsuka. In addition to being one of Japan’s largest cryptocurrency exchanges, Coincheck is also involved in both lending and payments business.
Coincheck was Japan’s largest cryptocurrency exchange in 2017 based on spot trading data from jpbitcoin.com data posted on Coincheck’s own website. According to a similarweb.com survey they were second largest through the third quarter of 2017.
Either way, Coincheck is a major player in the Japanese Bitcoin and cryptocurrency sphere, however their fortunes have been on the decline since a January 2018 hack that saw roughly $530 million in NEM coins stolen – making it the largest hack ever, even larger than the famed Mt. Gox hack. To Coincheck’s credit, they’ve responded quickly, refunding customer’s stolen coins from their own assets.
Still, visits to the Coincheck website have been declining and we’ll look closer at the impact of the hack below.
Traders continue questioning the security of their funds at Coincheck following the January 2018 hack that saw $530 million worth of NEM tokens (260,000 NEM) stolen from the exchange in a security breach. The exchange has had its reputation seriously marred, and while it is working hard to restore its reputation, there remain questions over whether it can regain its former glory.
It’s somewhat ironic that the hack occurred at a leading Japanese exchange, as it mirrors the theft of 850,000 Bitcoin from Mt. Gox several years earlier. Mt. Gox was forced into bankruptcy by the theft, but Coincheck remains solvent, despite the larger size of this theft, but the complete ramifications to the business have yet to be seen.
The breach occurred because Coincheck had the NEM coins stored in web-based hot wallets, and even though these are more vulnerable than cold storage, and despite warnings from the NEM Foundation to move the NEM coins from the hot wallets the theft occurred. Japan’s Financial Services Agency (FSA) has been keeping close watch on the exchange since.
On the positive side, Coincheck has agreed to reimburse all client losses from their own funds. Clients are being reimbursed in Japanese yen rather than cryptocurrency. The Japanese Financial Services Agency has already conducted an investigation to ensure that Coincheck is able to repay the losses, and have found the balance sheet strong enough to repay investors.
In the wake of the hack the exchange had suspended all withdrawals, but has since lifted the ban for Japanese yen, and is lifting it on a coin by coin basis for cryptocurrencies.
They also suspended new registrations, and as of May 2018 all new registrations remain suspended. The exchange does appear to be trying to return to normal however, slowly restoring withdrawal for various altcoins. They have also been promoting a zero-fee trading campaign since March 2018 in an effort to keep their existing client base.
Coincheck was not a licensed exchange in Japan prior to the hack, and it remains unlicensed now, but it does appear to be working closely with the FSA and working towards licensure.
What’s really concerning about the hack is that Coincheck was warned about the security implications of using hot wallets for coin storage prior to the hack. And otherwise they had been taking all the usual security precautions seen at major cryptocurrency exchanges.
Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures have been bolstered and Coincheck does keep client funds segregated. It is this segregation that probably kept the company solvent following the hack. They also support 2-factor authentication for client accounts and warn clients to use 2FA, as well as strong passwords that aren’t being used elsewhere. This obviously wasn’t sufficient to prevent this particular hack.
The exchange also uses Secure Socket Layer certificates to provide encryption. The company claims that user passwords are hashed with the bcrypt hash function. Additionally, client identification is currently handled through SMS authentication as well as the submission of some form of government ID.
Coincheck appears to be working through their issues, and they have moved to cold storage wallets for stored funds, but it could be some time before their reputation is fully restored – if it ever is.
Because Coincheck is currently running a zero-fee trading campaign there is no fee schedule currently published. However, there were numerous online complaints prior to January 2018 of the extremely high fees charged for buying and selling altcoins on the platform. Some reports are that fees were as high as 4% when buying or selling various altcoins.
In contrast to this, the Coincheck website claims to charge maker and taker fees, which is standard for the industry. For deposits and withdrawals, fees are as follows:
- Bank transfers in JPY are free
- Bank transfers in USD cost USD$25
- Bank transfers from abroad JPY 2,500
- JPY withdrawals = JPY 400
- USD withdrawals = JPY 2,500
- Interest rate for BTC borrowing = 0.05% per day. The exchange says: “Interest rate are to pay together when the borrowing period expires.”
- Zero fee for virtual currency deposits
- To access the “fast deposit” features, there’s a fee of 0.002 BTC. Fast deposits can only be done in BTC.
Fees for virtual currency transfer are the network fees and are as below:
Because Coincheck also runs a payment network there are fees for payment at convenience stores within Japan and for quick payments. Additionally there are fees for swaps and fees for margin trading.
All the fee information can be seen here
Nearly all of the visitors to the Coincheck website are based in Japan, with small numbers also coming from the U.S., Canada and China. According to data from similarweb.com over 96% of Coincheck visitors are from Japan.
Registering at Coinbase
As of May 2018 new registrations at Coinbase remain suspended due to the January security breach. Once they do re-open registrations, assuming the process hasn’t changed, you can easily register with a valid email address, or with your Facebook account. Account verification via SMS is required to make deposits in JPY, which can be done through bank transfer or credit card. Credit card purchases do require additional identity verification by uploading a government issued ID.
Coincheck API and Mobile Access
There are both public and private APIs supported by Coincheck. The public API is used for accessing the order book and order status, while the private API is designed for creating and cancelling orders.
There are also mobile applications available in both iOS and Android versions. The iOS version is the better rated of the two, receiving 4.5 stars out of 5 possible stars in the Apple iTunes store. That’s based on ratings by almost 200 users. iOS users had few complaints, and one even came to the defense of Coincheck following the hack.
The reviews aren’t as strong for the Android version, with nearly 5,000 users giving the app 3.7 stars out of 5 possible stars. The most prominent complaint is that there is no functionality indicating if a position is profitable or not, making it impossible to use the mobile app for trading.
What the Community says about Coincheck
Understandably there has been some blowback since the security breach, with a number of users taking to various internet forums and social media sites to complain about still being able to trade at Coincheck, but being unable to make withdrawals on many of the coins held there.
In some cases the issues were not Coinchecks’, but rather down to user error. One complaint on the Bitcointalk.org forum about credit card withdrawals turned out to be an issue with KYC standards, and ultimately the user was at fault.
Prior to the January hack the poor reviews for Coincheck were little different than those you’d find for any large cryptocurrency exchange. That is, long transfer times, high fees, a lack of customer support, and notably that the mobile platform is “nice”, but unsuitable for trading.
Some reviewers complained they were unable to reach support, but were later directed to the correct URL for an online submission by the Coincheck support staff.
There were also some complaints about language settings, with users occasionally complaining that content was showing up in Japanese rather than English. We’re not sure if this was a problem on Coincheck’s side or user error, but to be fair Coincheck is a Japanese company.
Finally, there were an increasing number of complaints about customer service since the security breach, but this is likely because they’ve been buried with requests since that time. Some users have even complained of receiving no response at all, which certainly does nothing to help Coinbase’s reputation.
Coincheck Pros and Cons
While the security breach is certainly a black eye for Coincheck, there are still positives about the exchange, so let’s break down the pros and cons of trading with Coincheck.
- They took responsibility for the massive security breach and are still operating. While the damage to their balance sheet remains unclear, at least they are reimbursing NEM investors the $530 million that was stolen.
- In addition to BTC, they support multiple altcoins, including: ETH, LSK, XMR, XRP, ZEC, REP and FCT.
- Spot trading
- Leveraged trading in cryptocurrencies (not JPY). Leverage up to 5x.
- Zero trading fees during a promotional campaign that’s still running as of Q1 2018
- Choose to begin trading by creating an account either with Facebook or your email address.
- Trade bitcoin around the clock
- Tradeview trading platform
- Supports simplified Chinese
- Mobile app and API
- Coincheck has a payments platform, which is a good revenue diversifier.
- The exchange suffered the worst hack of any cryptocurrency exchange in history, with losses of $530 million in NEM coins surpassing the Bitcoin losses suffered at Mt. Gox.
- Some reports that English-language support is slow to respond.
- Users complained of high fees prior to the zero-trading fee promotion.
- Mobile app users complain about the language selection on the interface, some saying it automatically goes to Japanese and others complaining that it does not.
You can look at trading with Coincheck in two ways currently. On the one hand you could consider their lack of security in allowing the largest hack of a cryptocurrency exchange in history as a fatal flaw and stay far away. Or, on the other hand you could consider it as a lesson well learned, and presume that Coincheck will come back from the hack stronger than ever. Other exchanges have certainly survived hacks. Consider the 2016 Bitfinex hack of roughly $72 million, which that exchange returned to clients. Yes, the Coincheck hack was far worse, but they are working diligently to return to normal as quickly as possible.
While Coincheck wasn’t licensed at the time of the hack, and hasn’t yet been licensed either, they have been working with Japan’s FSA to get licensure. The FSA had been holding off on granting the license due to security flaws they had noted. Perhaps waiting for Coincheck to receive a license from the FSA will be a good plan, and you can feel more comfortable that the exchange has been secured.
Otherwise, you certainly can’t beat the zero trading fees currently on offer, although you might have to worry about making withdrawals as the lack of ability to withdraw is one of the chief user complaints currently. That said, Coincheck continues to slowly make altcoin withdrawals available, so this is probably just a temporary situation.
Those living in Japan are in the best position to use Coincheck currently. If you live elsewhere it might be best to choose one of the other many exchanges available, at least until Coincheck resolves all the ongoing issues and gets back to business as usual.