Japan expands cryptocurrency crackdown after Coincheck hack | HT Tech

Japan expands cryptocurrency crackdown after Coincheck hack

Japan penalises several cryptocurrency exchanges after Coincheck suffered major breach, losing cryptocurrencies worth $530 million.

| Updated on: Mar 08 2018, 10:08 IST
Japan cracks down on seven cryptocurrency exchanges
Japan cracks down on seven cryptocurrency exchanges (AFP)

Japan's financial regulator ordered further improvements at embattled cryptocurrency exchange Coincheck Inc. and penalised six others, including one operated by publicly listed GMO Internet Inc.

The Financial Services Agency told Coincheck to revise its management structure, improve anti-money laundering procedures and submit a report by March 22. Two exchanges — FSHO and bit station — were instructed to halt operations for a month, the agency said at a briefing in Tokyo Thursday. The other exchanges facing penalties are GMO Internet's GMO Coin, Tech Bureau Corp.'s Zaif, Bicrements and Mr. Exchange.

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The FSA has come under fire for allowing 16 operators, including Coincheck, to operate while they await a decision on their applications under a revised licensing system introduced last year. It has approved applications for another 16, some of which like BitFlyer Inc. and Zaif are among the world's largest trading venues for certain cryptocurrencies.

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Bitcoin extended losses after the announcement. The FSA is seeking to shore up security after the $500 million Coincheck hack on January 26 exposed flaws in new regulations allowing cryptocurrency exchanges to operate in the country.

GMO Faults

The FSA said it found problems during an onsite inspection of GMO on Feb. 13, saying the company failed to investigate the root cause of numerous system faults and to take steps to prevent them from happening again. The exchange must respond with a plan to improve its internal systems by March 22. GMO Internet shares fell as much 3.6 percent.

"We will make efforts with all of our power to restore trust as early as possible," said Junko Suzuki, a spokeswoman for GMO.

Bit station, one of the exchanges operating without a license that was penalized on Thursday, is withdrawing its application, the FSA said. Another two, including bitExpress, are also no longer seeking the agency's approval to operate.

The FSA said Coincheck must "drastically" revise its management structure, hinting at possible leadership changes. It was also told to make other deep operational adjustments before it can restart halted trading or open new accounts, the operator said on its website.

The latest orders come after the FSA in January told Coincheck to submit a business improvement report by Feb. 13, which it did. The company will hold a press conference at 4 p.m. in Tokyo.

Coincheck Reimbursement

The FSA likely won't oppose Coincheck's plan to reimburse users of the hack, an agency official said on Thursday. On Jan. 28, two days after the heist, Coincheck said it will use company funds to repay more than $400 million to customers who lost money in the attack.

Bitcoin slipped to $9,669 on Thursday in Tokyo, extending overnight losses, according to prices compiled by Bloomberg. The largest cryptocurrency has slumped 16 percent during its three-day slide. Rival tokens also slipped, with Ripple, Ether and Litecoin declining at least 1 percent.

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First Published Date: 08 Mar, 10:06 IST