Japanese government regulators shuttered two cryptocurrency exchanges in the long-awaited aftermath of the massive Coincheck hack when hundreds of millions of dollars in digital currency were lost.
FSA Suspends Two Exchanges
Japanese Financial Security Agency (FSA) released a statement outlining regulatory steps it was taking against cryptocurrency exchanges earlier today. Most prevalent is the order that both FSHO and Bit Station temporarily suspend their business for a month starting today March 8.
The statement alleges that FSHO “does not have a proper system to monitor trading and has not given training to its employees,” and that an employee at Bit Station has used customer funds for his own trading purposes.
In addition, five other exchanges, including Coincheck were ordered to improve their business practices. These steps have been months in the coming and were prompted by the massive Coincheck hack that resulted in the loss of 530 million worth of NEM cryptocurrency.
The hack was ruled in part to have been a result of lax security practices at the company where customer coins were held in online wallets making them easily accessible to cyber-criminals.
At the time Coincheck said it had planned on moving the coins to a more secure offline wallet but were understaffed and hadn’t yet had the time. The FSA searched Coincheck’s offices and handed down sanctions at the time, promising more to come on March 8.
Effects of Coincheck Hack Linger on
Though Coincheck has been promising to reimburse $400 million to all 260,000 customers since the time of the hack nothing has been paid out yet and it is still unclear how the funds will be found to do so.
Cryptocurrency exchanges are required to register with the FSA in Japan but at the time of the hack Coincheck was given an exception to do business while the FSA reviewed it’s application as it had grandfathered the ruling.
In February seven plaintiffs – two companies and five individuals – filed a lawsuit against Coincheck seeking compensation for their lost NEM coins. These actions by the FSA follow a lot of speculation in the country’s crypto community over security issues within the exchanges. Japan has been home to the two largest recorded hacks, Coincheck and the now legendary Mt. Gox.
A more recent controversy over the amount of advertising that Japanese exchanges are engaged in showed that some companies were earmarking much more for billboards and television advertisements than for personal training and security protocols.
Japan is one of the leading countries implementing cryptocurrency at point of sales with over 10,000 business accepting it. The countries most popular exchange bitFlyer has over a million users.