Japan to punish several cryptocurrency exchanges, halt operations at others

[alyssa85]

https://www.reuters.com/article/us-crypto-currencies-japan/japan-to-punish-several-cryptocurrency-exchanges-halt-operations-at-others-nikkei-idUSKCN1GJ1AE

TOKYO (Reuters) - Japan’s financial regulator will this week slap several cryptocurrency exchanges with administrative punishment notices and is considering forcing some to suspend their business, the Nikkei business daily reported on Wednesday.

The Financial Services Agency may also tell Coincheck Inc - the exchange targeted by hackers in a $530 million theft of digital money in January - to raise its standards, in what would be the second such order to the exchange, the Nikkei said.

The FSA will mete out the punishments after uncovering flaws in customer protection and anti-money laundering measures during on-site checks at the exchanges, the Nikkei said, without citing the source of the information or specifying what the punishments would entail.

It did not specify which exchanges would be targeted.

[richardsNY]

Great development from Japan's regulator, especially with an eye on the future security of exchanges and their fund storage, but I would like to see more action happen primarily targeted at Coincheck, because I still haven't seen them even remotely name up a reason to have like $500 million worth of crypto value sitting in hot wallets. Even worse is the fact that it only concerned one single coin, which means that Coincheck has had far more crypto value sitting in hot wallets if we count other cryptos as well. Seriously, nothing in the world justifies any exchange to store that much value in hot wallets -- it's an act that I consider to be very shady. It just doesn't make any sense....

[alyssa85]

We now know more about which exchanges are affected. According to the following thread:

https://www.reddit.com/r/BitcoinMarkets/comments/82wtky/japan_punishes_seven_cryptocurrency_exchanges/

Japan punished seven cryptocurrency exchanges, ordering two of them to suspend business, in an effort to shore up consumer protection after a $530 million theft of digital money from Tokyo-based Coincheck Inc earlier this year.

The exchanges included Coincheck, served with its second such notice since it was targeted in the late-January heist, and GMO Coin, run by GMO Internet Inc (9449.T). Bit Station and FSHO were ordered to halt operations for a month.

[alyssa85]

Some more detail on this story:

https://www.ft.com/content/24f818e8-2276-11e8-9a70-08f715791301

At Nagoya-based Bitstation, a company official “misappropriated user cryptocurrencies for private use”, said the FSA. It ordered Bitstation to halt its business until April 7 and report on improvements to its handling of user funds.

At FSHO, based in Yokohama, the regulator said staff were inadequately trained and did not follow internal procedures. “There were repeated cases of high-value cryptocurrency trades with no judgment made about the need for notification of a suspicious transaction,” said the regulator.

FSHO was also ordered to suspend trading until April 7 and make the necessary notifications of suspicious transactions.

[kevoh]

Great development from Japan's regulator, especially with an eye on the future security of exchanges and their fund storage, but I would like to see more action happen primarily targeted at Coincheck, because I still haven't seen them even remotely name up a reason to have like $500 million worth of crypto value sitting in hot wallets. Even worse is the fact that it only concerned one single coin, which means that Coincheck has had far more crypto value sitting in hot wallets if we count other cryptos as well. Seriously, nothing in the world justifies any exchange to store that much value in hot wallets -- it's an act that I consider to be very shady. It just doesn't make any sense....

Trying so hard to believe that Coincheck was just lax with the security of their fund storage (which makes them a shitty exchange by the way) but the fact that the hack involved only NEM coin made me so suspicious of their action.