As governments around the world start working toward the regulation of cryptocurrency, Japan is taking regulation to on-site inspections. Following the hack of Coincheck, financial authorities in Japan are working to ensure that exchanges do everything they can to keep user assets safe.
FSA Works To Ensure Security Among Cryptocurrency Exchanges
As mentioned above, Japanese financial authorities are starting to crack down on security in the cryptocurrency exchange space. On friday, the Financial Services Agency (FSA) announced that it has requested that all cryptocurrency exchange operators in japan report on how they manage risks and protect customer assets. The request from the FSA addresses both licensed exchange operators as well as those that are still waiting on approval.
FSA Launches On-Site Investigations
As part of the agency’s efforts to ensure security among cryptocurrency exchanges, the FSA has started on-site checks. In fact, according to StraitsTimes, the FSA has already raided Coincheck’s offices and issued an administrative order against the company. Ultimately, the FSA believes that Coincheck didn’t take the proper security precautions, ultimately opening its customers to theft. In a statement, Taro Aso, Japan’s Financial Services Minister, had the following to offer:
We have started on-site inspections on multiple operators to examine their international management systems, including system risk management.
However, Coincheck isn’t the only cryptocurrency exchange that is expected to be inspected. In fact, the FSA said that throughout the months ahead, the on-site inspections will be expanded to all cryptocurrency exchanges that operate within Japan.
The Hack That Started It All
Ultimately, the push in Japan to ensure the safety of customer assets among cryptocurrency exchanges comes as the result of the Coincheck hack. Taking place in late-January, during a hack on Coincheck systems, $530 million in NEM cryptocurrency was stolen from users. This hack became the largest the cryptocurrency sector had seen since MtGox got taken for $480 million in cryptocurrency in 2014.
Once Again, Regulation Isn’t Such A Bad Thing
For the past few months, the hot topic in the cryptocurrency space has been regulation. While many have looked at regulation as a negative thing, I believe that it is a major positive for the industry. In fact, what’s happening in Japan is a prime example as to one of the reasons that regulation is actually needed in the space. Here’s why I believe the crypto-space needs regulation:
- Protection From Theft – While no one can tell you whether or not the hack on Coincheck would have happened had Japanese regulators started security inspections sooner, we can say that chances of a hack like this would be smaller. Ultimately, these hacks cost investors and the exchange operators money, and quite a bit of it. Regulation will help to keep theft at bay.
- Criminal Activity – Also, there are several reports stating that cryptocurrency is being used for illegal activities. Due to the transparent nature of the blockchain, regulatory authorities would be able to track the funds used by criminal enterprises, ultimately helping to fight crime, rather than fund it.
- Validation – The reality is that until the cryptocurrency market is regulated, the world will have a hard time accepting these assets as an actual currency. So, in my view, each step closer to wide-spread regulation is a step closer to wide-spread acceptance.
It’s a shame that so many people lost so much money in the Coincheck hack. However, it is great to see that regulatory authorities are starting to see value in cryptocurrency and stepping in to protect the consumers and enthusiasts that take part in it. We’ll continue to follow the story and bring the news to you as it breaks!