Japanese online broker Monex Group Inc yesterday said it would buy virtual currency exchange Coincheck Inc, which was hit by a massive hack that saw thieves steal hundreds of millions of dollars in virtual currency.
The decision came after Coincheck refunded more than US$440 million to its 260,000 customers who lost their holdings of NEM, a leading cryptocurrency, following the hack.
Thieves siphoned away 523 million units of the virtual currency from Coincheck — then valued at US$547 million — during the January hack, thought to be one of the biggest ever.
Photo: Reuters
Monex said in a statement it would acquire all of the 1.78 million shares of Coincheck for ¥3.6 billion (US$34 million).
“We aim to build a secure business environment for customers by fully backing up Coincheck’s enhancement process” after authorities ordered improvements after the hack, the broker said.
Coincheck chief executive officer Koichiro Wada and chief operating officer Yusuke Otsuka are to step down, and Monex managing director Toshihiko Katsuya is to take over the chief executive officer post.
The Japanese Financial Services Agency (FSA) last month ordered five cryptocurrency exchanges, including Coincheck, to make improvements to their business operations, while slapping two exchanges with suspension orders.
The Coincheck theft exceeded the US$480 million in bitcoin stolen in 2014 from another Japanese exchange, Mt. Gox.
That hack in 2014 prompted Japan to issue new regulations, requiring exchanges to obtain a government license, but Coincheck was allowed to continue operating while the FSA was reviewing its application.
Japan is a major center for virtual currencies and as many as 10,000 businesses in Japan are thought to accept bitcoin.
However, when Coincheck explained how hackers made off with the virtual currency, it said part of the problem was beyond its control: Japan’s lack of software engineers.
Coincheck said that no matter how hard it tried, it simply could not hire workers with the skills to seal gaps in security.
“We were aware we didn’t have enough people working on internal checks, management and system risk,” Wada said last month. “We strived to expand using headhunters and agencies, but ended up in this situation.”
Coincheck is not alone. Companies across Japan’s booming cryptocurrency industry are scrambling to hire engineers, including cybersecurity experts and specialists in blockchain, the computer code that underpins bitcoin.
The resulting shortage risks blunting Japanese exchanges’ competitive edge as the country’s cryptocurrency industry matures, experts say. It could also leave the industry exposed to more thefts.
“It could put the brakes on everything,” said Alexander Jenner, a headhunter at Computer Futures in Tokyo.
“The sector’s growing so quickly, and the better exchanges are surviving, but many of them will fail,” he said
There are 32 exchanges operating in Japan. About 100 other companies have approached the watchdog that oversees the sector about applying for a license, a senior FSA official said.
Demand is particularly high for engineers with skills that could help growth, from designing user-friendly interfaces to writing code that helps withdrawals of digital coins, as well as the security expertise needed to better protect consumers.
Japan does not compile data on blockchain or software engineers. In 2016, though, there was a shortfall of more than 15,000 workers in big data and artificial intelligence, which rely on software engineers, the Japanese Ministry of Economy, Trade and Industry said.
That number will rise to 50,000 by 2020, it projected.
Headhunters specializing in cryptocurrency and blockchain say the supply of labor cannot keep up with demand.Exchanges are prepared to pay.
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