Japanese crypto exchange firm gets a slap on the wrist

Japan’s financial services agency has taken action against crypto exchange Coincheck and ordered it to get its act together after hackers stole $530 million worth of digital money from its exchange, shocking the nation’s cryptocurrency market in one of the biggest cyber heists, according to a Reuters report.

The theft brings to light 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 industry to stimulate economic growth, said Reuters.

The Financial Services Agency (FSA) said it has ordered improvements to operations at Tokyo-based Coincheck, which had suspended trading in all cryptocurrencies except bitcoin after hackers stole 58 billion yen ($534 million) of NEM coins, among the most popular digital currencies in the world, it reported.

Coincheck has promised to return about 90 percent with internal funds. However, it has yet to figure out the details of the process.

According to the Reuters report, 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.

The FSA has registered 16 cryptocurrency exchanges so far, and another 16 or so are still awaiting approval while continuing to operate.

The pilfered Coincheck assets were said to be kept in a “hot wallet”, a part of the exchange connected to the internet, according to the company. That contrasts with a cold wallet, where funds are stored securely offline.

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, reported Reuters.

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 independently return the stolen funds to its owners.

The FSA is due to brief media on the matter soon, stay tuned for updates.