Japanese regulators are going to check companies that engage in activities related to various virtual currencies. This decision was made after a major hacker attack on the Coincheck exchange. Regulators believe that increased scrutiny will force these companies to strengthen safety and consumer protection measures.
Coincheck is one of 32 companies that operate as virtual currency exchanges in Japan. Only 16 of them are officially registered with the Financial Services Agency, as required by law that came into force in April 2017. The other half of the companies, including Coincheck, were allowed to continue their operations pending registration because they were created before the law was passed.
After hackers stole the virtual currency NEM equivalent to 58 billion yen ($531 million) from Coincheck wallets on January 26, the Financial Services Agency ordered Coincheck to strengthen security and conducted an inspection at the company's offices.
Other Japanese cryptocurrency exchanges were ordered by the agency provide reports on systems including asset management, corporate governance and security. Many of these crypto exchanges reported vaguely to the Financial Services Agency or were found to be managing assets in an insufficiently secure manner. Visiting these companies in person will help regulators gain a more complete picture of their operations.
Inspections of improperly operating companies will prompt Japan to strengthen security in the virtual currency industry. The lack of internal audit and cybersecurity experts means companies will be slow to improve their systems without regulatory oversight. The agency will take disciplinary action, including requirements to improve security systems, against market operators found to lack them.
As the virtual currency market expands, many operators are prioritizing attracting new customers with user-friendly features like instant withdrawals that reduce security. Coincheck, for example, only checked account balances twice a day, making it difficult to quickly detect unauthorized access or other irregularities.
Consumers also face security challenges when transacting with cryptocurrencies because any security measures exchange operators take are hidden from consumers...
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According to https://asia.nikkei.com
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