Japanese Finance Minister tells cryptocurrency exchanges to strengthen controls after US$530m theft
Japanese Finance Minister Taro Aso said on Tuesday (Jan 30) that management systems at cryptocurrency exchanges needed to be strengthened after hackers stole US$530 million of digital money from Tokyo-based Coincheck.
The recent theft of roughly ¥58 billion worth of cryptocurrency holdings from a Tokyo-based virtual currency exchange — the largest-ever heist of its kind — highlights the hazards of trade in an asset that policymakers are struggling to regulate, as well as the broader risks for Japan as it aims to leverage the financial technology or “fintech” industry to stimulate economic growth.
Masatsugu Asakawa, Japan’s top financial diplomat, said on Monday that cryptocurrency regulation was likely to be on the agenda at the March meeting of G20 finance ministers and central bankers in Argentina.
The disclosure last weekend by Coincheck Inc., one of the nation’s largest cryptocurrency exchanges, that a hack had illegitimately transferred ¥58 billion worth of its NEM virtual currency — all client assets — sheds light on the problems in the security of such exchanges and was due to sloppy management, which left a huge amount of customers’ money at risk at Japan’s second-largest cryptocurrency exchange.
Just three days after the theft was reported, the Financial Services Agency issued a business improvement order for Coincheck. Executives of Coincheck say the firm will use its own capital to reimburse ¥46.3 billion — reflecting the decline in NEM’s unit value since the hack was reported — to all 260,000 customers who lost their money. However, the company has not specified any timeline or procedures for the reimbursement.
Cryptocurrencies were launched as tools that allow quick and easy settlements of web-based payments and money transfers. As interest rates remain at ultra-low levels, however, virtual currencies have drawn attention as one of the few investment tools that can produce sizable gains. The steep growth in cryptocurrency transactions — and the subsequent surge in prices — is the result of speculative investments by individual investors. Virtual currencies are rarely used as payment tools, but attract vast amount of funds mostly in speculative transactions.
The overheating of the cryptocurrency market with speculative money and the wild price fluctuations have raised alarms and calls for tightening of regulations in many countries from the viewpoint of financial system stability. China and South Korea have already tightened their regulations on cryptocurrencies, and Germany and France are reportedly set to propose new international regulations for discussion at the Group of 20 meeting of finance ministers and central bank chiefs in March.