The financial regulator of Japan will slap administrative punishment notices on several cryptocurrency exchanges this week and even have plans of forcing a number a number of the exchanges to suspend their business.
At the same time, Coincheck Inc. exchange, which was recently a target for hackers’ in a $530 million theft of digital currency might be ordered by Financial Services Agency to raise its standards.
This becomes the second time such order is given to Coincheck by its regulators since January when the hack took place, an occurrence that is also dubbed the largest heist of digital money ever.
The punishments will come after FSA uncovered flaws in the customer protection and anti-money laundering activities during on-site checks at the exchanges. It was however not clear which exchanges was being targeted, or rather what form of punishments would take.
FSA was never available for any further clarification or comment outside business hours. Conversely, Coincheck did not respond immediately when emailed for comment. This Coincheck theft highlighted the trading risks – an asset with which policymakers all over the world grappling, and drawing attention to Japan’s system of regulating the exchanges.
In 2017, Japan became the first country in the world to regulate cryptocurrency exchanges at a national level. So far, sixteen exchanges are listed with the authorities, and further 16 which include Coincheck were permitted to continue operating as the regulators continued assessing their applications.
After the robbery that happened with Coincheck, FSA have affirmed that it would be investigating all the cryptocurrency exchanges for security gaps. The exchanges have since been ordered to file reports on system risk management as well as cryptocurrency storage.
Sources said that the outcome of these checks by FSA means some of the unregistered exchanges will as well be ordered to stop their operations.
FSA told Coincheck after the cyber theft to strengthen its security systems. The second order of improvement will be focusing on customer safety and protection, with the FSA watching closely the progress of compensating investors who were affected by the hack.
Coincheck exchange has however promised to pay off approximately $425 million of the cryptocurrency that was lost during the robbery.