Japan’s cryptocurrency exchange operators step up norms following Zaif hack
Japanese cryptocurrency exchange operators have decided to make regulatory norms more secure following a recent hacking incident. The hack saw digital assets worth close to $60 million stolen from cryptocurrency exchange Zaif early last month. This pushed local exchange operators to adopt more stringent rules, The Japan Times reported, citing sources.
The Japan Virtual Currency Exchange Association, a self-regulating body for such trading platforms, will fix an upper limit to the amount of cryptocurrencies managed online. It is expected that the ceiling would be applicable at nearly 10 to 20 percent of the customer deposits, the sources added.
The group will soon come up with a revised set of regulations and will implement them once the Financial Services Agency (FSA), Japan’s financial regulator, approves the same.
During the hack incident at Zaif, hackers stole digital assets worth nearly $59.7 million or 6.7 billion yen. The exchange reported the matter to the FSA, who is currently investigating the matter. Hackers stole 5,966 BTC, along with some Bitcoin Cash [BCH] and MonaCoin [MONA].
Industry sources have said that the hacking incident at Zaif, which is operated by Osaka-based fintech firm Tech Bureau Corp, was probably caused by the fact that the exchange had allotted a considerable portion of cryptocurrencies online. Such trading platforms tend to keep large chunks of customer-owned virtual currencies offline for security purposes.
However, there are times when certain portions of these digital assets are kept online, to make them available for transactions. Out of the total cryptocurrencies stolen during the Zaif hack, customer-owned digital assets that were originally managed on the Internet accounted for nearly 4.5 billion yen.
Previous hacking incidents
Since the beginning of this year, Japan has witnessed a series of hacking incidents back-to-back. Earlier this year, crypto exchange Coincheck fell prey to what is considered to be the world’s largest cryptocurrency exchange theft. A hacker stole around 523 million NEM [XEM] tokens, worth $530 million at the time of the theft, from the platform’s customer assets that were managed online.
Following this hacking incident, the country’s financial regulator stepped up its scrutiny of local cryptocurrency exchanges. Back in March, the FSA had issued a warning to top exchange Binance for conducting business without a license.
Moreover, in the same month, a number of exchanges were shut down after the government delivered punishment notices to these businesses. The FSA also conducted on-site inspections of 23 cryptocurrency exchanges in August, out of which six exchanges had received “business improvement orders” from the regulator.
According to the FSA, the review of registration procedures is necessary to protect local investors. Coincheck is yet to receive the results of the inspection carried out by the regulator.
Image via Shutterstock
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