Japan has joined the league of Asian countries that have introduced stricter regulations to guide the cryptocurrency market. In what can best be described as a marked departure from the norm as far cryptocurrency in Japan is concerned, the Financial Services Agency (FSA) has ordered a series of stricter cryptocurrency regulations. This comes in the wake of the Coincheck hack, one of the biggest cryptocurrency hacks so far. More than $530 million worth of cryptocurrency was stolen in the hack and the FSA is taking serious steps to ensure that such an event does not repeat itself.
On January 26, the world was informed of yet another high-profile cryptocurrency hack as Coincheck released a number of statements declaring that the platform had become the latest victim of a cryptocurrency hack. This time, the coins stolen were not bitcoin or ether, but rather, XEM, the cryptocoin of the NEM blockchain.
According to information made known at the time, the cybercriminals had taken advantage of the platform’s poor security infrastructure to steal the cryptocoins. Apparently, Coincheck had stored the coins in an online “hot” wallet instead of the much safer offline “cold” wallet.
There were also issues with the platform’s smart contracting protocol as well as lack of 2-factor authentication (2FA).
The FSA has beamed its searchlight on Coincheck. The platform has been instructed to revise the structure of its management setup. The regulatory body has also mandated Coincheck to upgrade its AML procedures as well as to submit a report to the agency by March 22.
In the immediate aftermath of the hack, the FSA had instructed Coincheck to submit a damage report on the hack as well as measures that could be taken to prevent such an attack from ever being successful.
Coincheck isn’t the only cryptocurrency exchange platform that is under the scrutiny of the FSA as the regulatory body also instructed both Bit Station and FSHO to put a halt to all their operations.
In a briefing delivered by the agency on Thursday, March 08, 2018, it also announced that some other exchange platforms were facing penalties. These platforms are Mr. Exchange, GMO Internet’s GMO Coin, Bicrements, and Tech Bureau Corp.’s Zaif.
Commenting on the situation with GMO, the agency said that a number of systemic faults were discovered during an on-site inspection of the exchange platform. According to the agency, GMO hadn’t done enough to investigate these problems and now the platform must respond with a plan to solve these issues on or before March 22, 2018.
Commenting on the situation, a spokeswoman for the platform, Junko Suzuki said that concerted efforts were being made to restore trust in the platform as swiftly as possible.
The FSA has come under a bit of criticism for allowing cryptocurrency platforms to operate in the country while their applications were still under review. Already, there have been a number of casualties as Bit station has announced that they will be withdrawing their application with the FSA to operate in Japan.
According to the FSA, some other platforms whose applications are still pending have also indicated that they are no longer interested in getting approvals to operate in Japan.
Featured image by Anton Fritsler (kit8)