coin-check

Japan raps Coincheck, orders broader checks after $530 million cryptocurrency theft

TOKYO (Reuters) – Japan’s financial regulator said on Monday it would inspect all cryptocurrency exchanges and ordered Coincheck to get its act together after hackers stole $530 million worth of digital money from its exchange in one of the biggest cyber heists on record.

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 industry to stimulate economic growth.

The Financial Services Agency (FSA) on Monday ordered improvements to operations at Tokyo-based Coincheck, which on Friday 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.

Coincheck said on Sunday it would return about 90 percent with internal funds, though it has yet to figure out how or when.

The NEM coins were stored in a “hot wallet” instead of the more secure “cold wallet”, which operates on platforms not directly connected to the internet, Coincheck said. It also does not use an extra layer of security known as a multi-signature system.

The hack has drawn into focus Japan’s approach to regulating 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 FSA said it ordered Coincheck to submit a report on the hack and measures for preventing a recurrence by Feb. 13, and that it will, if necessary, conduct on-site inspections of other cryptocurrency exchanges.

The regulator also said it has yet to confirm whether Coincheck had sufficient funds for the reimbursement.

But 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.

In response to FSA’s order for improvements, Coincheck said in a statement that it would promptly strengthen its customer protection and governance, and develop its risk management systems.

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 are still awaiting clearance. Coincheck’s application was made in September.

“It’s been long said that cryptocurrencies are a solid system but cryptocurrency exchanges are not,” said Makoto Sakuma, research fellow at NLI Research Institute.

“This incident showed that the problem has not been solved at all. If Coincheck screws up its crisis management, that could deal a blow to the current cryptocurrency fever.”

NEM fell to $0.78 from $1.01 on Friday but recovered to $0.95 late on Monday afternoon, according to CoinMarketCap. Crypto-currency related shares mostly rose in Tokyo, with GMO Internet, which offers cryptocurrency exchange services, gaining 5.7 pct.

Exchange operators in Tokyo said the Coincheck hack will likely cause concerns over security to grow among consumers, potentially pressuring the price of cryptocurrencies.

“I have to admit that all cryptocurrencies will now be tainted in their minds, so there may be a mid-term negative impact,” said Genki Oda, president of BitPoint Japan.

CRYPTOCURRENCY RISKS

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. 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.

In 2014, Tokyo-based Mt. Gox, which once handled 80 percent of the world’s bitcoin trades, filed for bankruptcy after losing around half a billion dollars worth of bitcoins. More recently, South Korean cryptocurrency exchange Youbit last month shut down and filed for bankruptcy after being hacked twice last year.

World leaders meeting in Davos last week issued fresh warnings about the dangers of cryptocurrencies, with U.S. Treasury Secretary Steven Mnuchin relating Washington’s concern about the money being used for illicit activity.

Japan’s top financial diplomat said regulation of cryptocurrencies would likely be on the agenda at the G20 finance chiefs’ meeting in Argentina in March.

South Korea will this week ban cryptocurrency traders from using anonymous bank accounts to crack down on the criminal use of virtual coins. China, worried about financial risks from such trading, has ordered some exchanges in Beijing to close.

Article Source: Reuters

CloudBuzz

The latest in curated technology related news collected from many of the leading news distribution, industry research and technology vendor firms on the planet.

Here you will find recent news sources from companies such as Reuters, Marketwired, IDC, Gartner or directly from cloud vendors such as Google, Microsoft or Amazon.

Is Your Data Safe In The Cloud?

Is Your Data Safe In The Cloud?

Cloud Data Safety This year has certainly been troublesome for businesses when it comes to data security. Numerous cyber attacks ...
Fake Digital Currency

WordPress Security 101 – Securing Your Plugins, Themes, and Services

Securing Your Plugins, Themes, and Services Continued from part 3 of our 5 part WordPress security series. For web scribblers who ...
The Unintended – and Intended – Consequences of Cloud Data Sovereignty

The Unintended – and Intended – Consequences of Cloud Data Sovereignty

Cloud Data Sovereignty It seems that everything has unintended consequences – whether positive or negative. Intended consequences are those that ...
Data Scientist Is The Best Job In America According Glassdoor

Data Scientist Is The Best Job In America According Glassdoor

Data Scientist Is The Best Job In America Data Scientist has been named the best job in America for three ...
Turn to the Cloud as Part of Your Data Breach Strategy

Turn to the Cloud as Part of Your Data Breach Strategy

Data Breach Strategy The latest Verizon Data Breach Investigations Report is out, and the verdict is in: data breaches are ...
Data as a Service

Data as a Service: 5 Strategies to Transition How You Access Data

Data as a Service Information wants to be free — at least that’s the saying. And like any good saying, ...
5 Recommendations for Effective Governance, Risk and Compliance Management

5 Recommendations for Effective Governance, Risk and Compliance Management

Effective Governance, Risk and Compliance Cloud adoption continues to grow, which is evident from the fact that annual 2016 revenues ...
How Many Jobs Per Sector Are At High Risk Of Being Taken By Robots By 2030

How Many Jobs Per Sector Are At High Risk Of Being Taken By Robots By 2030

Could a robot or machine be doing your job? The robotic revolution is set to cause the biggest transformation in ...
cloud 2020

IoTT, The Internet of Things, Tomorrow

What Should Your Home Be Telling You? Home. The place where you lay your head to sleep, where a roof ...
Cloud Services Providers - Learning To Keep The Lights On

Cloud Services Providers – Learning To Keep The Lights On

The True Meaning of Availability What is real availability? In our line of work, cloud service providers approach availability from ...