Thieves syphoned away 523 million units of the cryptocurrency NEM from Coincheck during the January 26 hack, exceeding the USD 480 million in virtually currency stolen in 2014 from another Japanese exchange, MtGox. In the wake of the theft, the country's Financial Services Agency instructed more than a dozen local exchanges to submit reports on their efforts to monitor systemic risks. Loading.Japanese officials have suggested Coincheck lacked proper security measures, making itself vulnerable to theft. It added that the hacker had not moved any of the funds to any exchange or personal accounts but that it had no way to return the stolen funds to its owners.
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Singapore-based NEM Foundation said it had a tracing system on the NEM blockchain and that it had "a full account" of all of Coincheck's lost NEM coins. "I have to admit that all cryptocurrencies will now be tainted in their minds, so there may be a mid-term negative impact," Genki Oda, president of BitPoint Japan, said. NEM fell to $US0.78 ($0.96) from $US1.01 ($1.25) on Friday but recovered to $US0.95 ($1.17) late on Monday afternoon, according to CoinMarketCap.Ĭrypto-currency-related shares mostly rose in Tokyo, with GMO Internet, which offers cryptocurrency exchange services, gaining 5.7 per cent.Įxchange operators in Tokyo said the Coincheck hack would likely cause concerns over security to grow among consumers, potentially pressuring the price of cryptocurrencies.
If Coincheck screws up its crisis management, that could deal a blow to the current cryptocurrency fever." "This incident showed that the problem has not been solved at all. "It's been long said that cryptocurrencies are a solid system but cryptocurrency exchanges are not," Makoto Sakuma, research fellow at NLI Research Institute, said. Japan started to require cryptocurrency exchange operators to register with the government only in April 2017, allowing pre-existing operators such as Coincheck to continue offering services ahead of formal registration. Exchanges less secure than cryptocurrencies themselves In response to FSA's order for improvements, Coincheck said in a statement it would promptly strengthen its customer protection and governance, and develop its risk management systems. The regulator also said it had yet to confirm whether Coincheck had sufficient funds for the reimbursement.īut the regulator does not have any rules banning the use of "hot wallets" by exchanges, nor does it set requirements on how much should be kept in "cold wallets," an FSA official said at a briefing. The FSA said it ordered Coincheck to submit a report on the hack and measures for preventing a recurrence by February 13, and that it will, if necessary, conduct on-site inspections of other cryptocurrency exchanges.
Last year, it became the first country to regulate exchanges at the national level - a move that won praise for boosting innovation and protecting consumers, and that contrasts sharply with crackdowns in South Korea and China. The hack has drawn into focus Japan's approach to regulating cryptocurrency exchanges. It also does not use an extra layer of security known as a multi-signature system.
The NEM coins were stored in a "hot wallet" connected to the internet instead of the more secure "cold wallet" which operates on platforms not directly connected to the internet, Coincheck said. The Financial Services Agency (FSA) ordered improvements to operations at Tokyo-based Coincheck, which on Friday suspended trading in all cryptocurrencies except bitcoin after hackers stole 58 billion yen ($AU660 million) of NEM coins, among the most popular digital currencies in the world.Ĭoincheck said on Sunday it would return about 90 per cent with internal funds, though it has yet to figure out how or when. The theft highlights the vulnerabilities in trading an asset that global policymakers are struggling to regulate and the broader risks for Japan as it aims to leverage the fintech (financial technology) industry to stimulate economic growth.
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