Japanese Crypto Exchanges Strengthen Self-Regulation Following Coincheck Hack

Japanese cryptocurrency exchanges are strengthening their self-regulation procedures following the hack of one of the country’s largest crypto exchanges, Coincheck. The Japanese Financial Services Agency has yet to approve Coincheck’s registration as a crypto exchange.

Also read: Japan’s DMM Bitcoin Exchange Opens for Business With 7 Cryptocurrencies

Strengthening Self-Regulation

The Japan Blockchain Association (JBA) has previously established self-regulation standards which its cryptocurrency exchange members voluntarily adopt. The standards include “the maintenance of cold wallet, etc., under the consent of the related members,” the association announced on Saturday after one of its members, Coincheck, suffered a hack which led to an approximately 58 billion yen loss on its platform.

The association currently has 127 members, 15 of them are crypto exchange members and 35 are blockchain members. Among crypto exchange members are Bitflyer, Coincheck, GMO Coin, and Bitocean. Bitflyer CEO Yuzo Kano is the association’s representative director. According to the JBA’s announcement:

The fact that the maintenance of the cold wallet was delayed caused the current illegal outflow. It is very regrettable.

The association noted that the Japanese Financial Services Agency (FSA) has alerted the representatives of each cryptocurrency exchange regarding their security. “We are looking for further measures,” the JBA emphasized, adding that its crypto exchange members have been told to “check the status of [their] security based on the possibility of cyber attack.” The association noted:

In the future, in order to appropriately secure the security of virtual currency exchange traders…we will establish stricter voluntary regulations and seek compliance with members.

FSA’s Concerns About Coincheck

According to Japan Times, the FSA had urged Coincheck to “address security concerns about the way it manages customer assets before Friday’s ¥58 billion theft of NEM tokens.” The publication quoted informed sources asserting:

As part of questionnaires issued in late August, the FSA asked exchange applicants how their assets were distributed in the two types of accounts [cold and hot wallets]…After the company [Coincheck] filed for registration in September, the FSA highlighted the risk of unauthorized accesses taking place in its computer system and urged it to strengthen security.

The financial authority usually takes two months to approve an application for a cryptocurrency exchange, the news outlet noted, pointing out that Coincheck’s application has already been under review for four months after its filing.

According to Reuters, the FSA has ordered Coincheck to submit “an incident report and measures for preventing a recurrence” by February 13. In addition, the agency may “conduct on-site inspections of other exchanges,” the news outlet noted. Furthermore, the Tokyo Metropolitan Police Department will launch an investigation into the exchange’s hack.

What do you think of Japanese exchanges’ self-regulation and Coincheck hack? Let us know in the comments section below.

Images courtesy of Shutterstock, the JBA, and Japanese FSA.

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