Coincheck Hack May Lead to On-Site Inspections of Other Japanese Exchanges

Japan’s Financial Services Agency (FSA) said that it may conduct on-site inspections of other domestic cryptocurrency exchanges in response to last week’s Coincheck hack.

Japanese Regulators May Inspect Other Exchanges in Wake of Coincheck Hack
The FSA, the regulatory body which oversees cryptocurrency exchanges in Japan, made this announcement during a press conference on Monday, according to a report from Reuters.

As CCN reported, the Coincheck hack, which was confirmed on Friday, is believed to have been the largest cryptocurrency exchange theft in history, eclipsing even the infamous Mt. Gox theft.

Because Coincheck kept most of its funds in internet-connected “hot wallets” rather than in offline “cold wallets, which are more secure, the hacker was able to steal approximately 523 million XEM — the native token of the NEM network — worth $530 million at the time of the theft.

The gravity of the theft left many wondering whether the FSA would strengthen its oversight of the country’s other cryptocurrency trading platforms, and the revelation that it may conduct on-site investigations at other exchanges appears to confirm that it will.

In addition to ramping up its oversight of the nascent cryptocurrency trading industry, the FSA also ordered Coincheck to enhance its security policies and submit a report detailing the reason for the hack and measures to prevent it from reoccurring in the future. The exchange must fulfill these obligations by February 13.

Coincheck to Partially Reimburse Customers, and NEM Won’t Fork
Coincheck has also said that intends to partially reimburse 260,000 customers who lost funds as a result of the hack. In all, the exchange will pay out 46.3 billion yen at a rate of 88.549 yen per XEM, which is a roughly 20 percent decrease from the estimated 58 billion yen worth of funds stolen. However, the company has provided a detailed payment plan for this compensation.

Notably, although the hack appears to have been isolated to Coincheck’s NEM wallet, the NEM Foundation has stated that it will not conduct a hard fork to recover the stolen funds. Rather, it has created an automated system that will follow and “tag” the stolen XEM tokens so that exchanges and other currency converters will be able to identify them and refuse service to the hacker.