Japan Creates Regulatory Body to Prevent Cryptocurrency Exchange Hacks
Japan leads the cryptocurrency world both in trading volumes and crypto-friendly regulation. Now, sixteen crypto exchanges in Japan will establish a self-regulatory body to prevent hacks.
Regulatory Body For Cryptocurrency Market
Japan is the largest cryptocurrency market in the world, boasting 61% of global trading volume for Bitcoin, which is held by 2.7% of the country’s population. Its crypto-friendly regulation has allowed many businesses to emerge, including the first Bitcoin exchange in the world – a Bitcoin Market set up in 2010.
But where there’s money, there’s risk. That first Bitcoin Market was quickly brought due to a scam in the same year. As time went by, the crypto market in Japan flourished, as well as scams and hacks.
Four years later, the famous Mt. Gox heist was covered by the news media worldwide. The exchange went bankrupt after having approximately 850,000 bitcoins, belonging to customers and the company, stolen. In 2014, the hack was worth $450 million. Those bitcoins are now valued at $9.6 billion.
The Mt. Gox scandal led to an amendment to an existing law which required banks as well securities firm from allowing Bitcoin transactions for customer accounts that were unregistered. Coming into effect in April 2017, the amendment also recognized virtual currencies as a method of payment.
The amendment, however, didn’t keep criminals from stealing approximately $534 million in NEM tokens, transferred through a total of nineteen accounts. The security breach, in January 2018, was caused by the lack of strong security measures of Coincheck. Japan’s financial watchdog, Financial Services Agency, ordered the exchange to improve its security practices. The company announced it would repay all 260,000 users affected in Japanese yen using its own capital.
After the hack, NEM announced it has created an automated tagging system: “This automated system will follow the money and tag any account that receives tainted money. NEM has already shown exchanges how to check if an account has been tagged. So the good news is that the money that was hacked via exchanges can’t leave.”
In the wake of the Coincheck hack, Japan Cryptocurrency Business Association and Japan Blockchain Association, representing Japan’s sixteen FSA-regulated crypto exchanges, have merged into a new self-regulatory organization, following a request by the FSA. The new body will aim to improve security measures and develop standards for activities around initial coin offerings.
Without a name for now, the new self-regulatory body announced it has appointed its Chairman, Taizen Okuyama, president of Forex trading firm Money Partners Group and Chairman of the JCBA. The newly appointed Vice Chairman is Yuzo Kano, CEO of bitFlyer and head of the JBA.