Wednesday, 26 September, 2018

Japan's financial watchdog issues order to Coincheck after large cryptocurrency theft

Projection of cyber code on hooded man Japan's financial watchdog issues order to Coincheck after large cryptocurrency theft
Nellie Chapman | 29 January, 2018, 12:24

Japanese cryptocurrency exchange Coincheck, which on Friday lost over $400 million in cryptocurrency to a hack, said it will use its own capital to reimburse customers.

Exchange operators in Tokyo said the Coincheck hack would likely cause concerns over security to grow among consumers, potentially pressuring the price of cryptocurrencies.

On Friday, Coincheck detected "unauthorized access" to its servers before suspending deposits and withdrawals for its customers in all assets, with the exception of bitcoin.

According to a report by Bloomberg, on Friday 26 January 2018 Coincheck, a Japanese cryptocurrency exchange, revealed that it was hacked.

In April 2017, the agency revised the payment services law to require that virtual currency exchanges become registered. A total of 523 million coins were stolen and the amount Coincheck has promised to return covers almost 90% of the $400 million (58bn yen) worth of NEM coins lost in the attack.

Around 260,000 customers have reportedly been affected by the theft.

As it stands, the theft has been limited to NEM, Coincheck said.

In particular, the company will repay all 260,000 users impacted by the theft of NEM coins, at a rate of 82 USA cents for each coin.

Jeff McDonald, vice-president of the NEM Foundation, said they don't consider a "hard fork" to be an option because the NEM system is working correctly.

The exchange hadn't implemented the security measures due to "the difficulty of the technology and a lack of staff able to carry out the task", Wada, who also serves as Coincheck's chief technology officer, told a roomful of unusually combative reporters during a 90-minute press conference at the Tokyo Stock Exchange headquarters that stretched into the early hours of Saturday morning.

However, pre-existing operators such as Coincheck have been allowed to continue offering services even as they await approval. Coincheck didn't use them and that's why they could have been hacked.

"We know where the funds were sent", said Otsuka. That's sparked a rally in the tokens, which were trading at around 98 cents on Monday, according to Coinmarketcap.com.

Coincheck said it acknowledged that the breach had caused "immense distress" to customers, exchanges and participants in the cryptocurrency sphere, and said it offered its "deepest and humblest apologies to all of those involved".

"A commitment by Coincheck to repay investors may at least partially explain the NEM price recovery, but can Coincheck actually deliver on that promise?" said Bert Ely, principal at financial consulting firm Ely & Co.in Virginia.

The Coincheck incident marks the biggest-ever theft of digital money in the nine-year history of virtual currencies, topping the heist at Japan's Mt. Gox exchange almost four years ago.