The Japanese government is imposing penalties on several cryptocurrency exchanges, after $530 million of virtual coins were lost earlier this year from the Coincheck hack. The Financial Services Agency (FSA), which has been checking the exchanges, said that FSHO and Bit Station exchanges were ordered to halt operations for a month.
It should be noted that this is a positive move and shows how regulation is creating a safer environment for crypto investors in Japan by enforcing greater exchange security. It should also be noted that FSHO and Bit Station are relatively small exchanges and the closures will have little effect on the wider crypto market.
The FSA said that FSHO was not properly monitoring trades and had not carried out employee training. The agency said it found that a Bit Station employee had taken Bitcoins for personal use.
Japan FSA expands crackdown on crypto:
– temporarily shuts 2 exchanges: FSHO, bit station
– penalizes 4: GMO, Zaif, Bicrements, Mr. exchange
– license applications withdrawn at 2: bitExpress, 1 more
– Coincheck can't return $$ until more audits
– Next big deadline for all: Mar 22
— Yuji Nakamura (@ynakamura56) March 8, 2018
Five other exchanges, including Coincheck, targeted in the massive hacking, were ordered to improve their operations. Coincheck had received a similar order earlier to beef up security measures and is also unable to return more of customers lost funds until there have been further audits.
Japan has been at the forefront of countries adopting and regulating cryptocurrencies. The exchanges ordered to improve their operations must file a plan to the regulatory agency by March 22.
The theft at Coincheck of the NEM currency was the second major hacking assault on a Japanese crypto exchange after the Mt. Gox debacle in 2014. Mt. Gox is still influencing the price of Bitcoin as detailed in a recent CoinDaily article on the actions of the trustee selling large tranches of bitcoin.
Japan has chosen to seize the opportunity and regulate exchanges, setting up a licensing system last year, although experts say such measures are no guarantee against hacking and cybercrime.
Japan has officially licensed 16 virtual-currency exchanges, and more, including Coincheck, are applying for licenses. As much as half of the world’s Bitcoin trading is estimated to be in yen.
Some countries like China are cracking down on virtual currencies, while other countries like the US have been cautious, encouraging their use in limited ways.
Japan is on of the few countries in that has TV ads and billboard posters advertising Bitcoin, although they come with warnings, in fine print, to invest at your own risk. Many larger Japanese retailers have also adopted bitcoin and are running trials ahead of national rollouts.