Japan yesterday imposed administrative measures on virtual currency exchange Coincheck after hackers stole hundreds of millions of US dollars in digital assets from the Tokyo-based firm in one of the biggest heists ever.
Units of the cryptocurrency NEM worth US$532 million were taken — based on the exchange rate on Friday — exceeding even the US$480 million in bitcoin stolen from the Mt. Gox exchange in 2014.
Coincheck suspended trading of all cryptocurrencies except bitcoin on Friday, and said it had lost 523 million units of NEM, the 10th-biggest cryptocurrency in the world based on market capitalization.
The Japanese Financial Services Agency (FSA) said in a statement that it had ordered Coincheck to investigate the cause of the incident, “properly” deal with clients, strengthen risk management and take preventive measures.
The financial watchdog told the exchange to respond to the orders by Feb. 13, warning that the agency would raid its office if necessary.
Coincheck has said it would use its own funds to reimburse about ￥46.3 billion (US$425 million) — at a rate of ￥88.549 per NEM — to all 260,000 customers who lost their holdings.
The company said it would reimburse customers in yen, not cryptocurrency.
The agency yesterday at a briefing said that it was checking to ensure that Coincheck had the ability to make those refunds, adding that it was carrying out checks at other exchanges in the wake of the theft to detect potential security problems.
The agency will supervise Coincheck to ensure the measures are being implemented and contracts are being honored, Japanese Chief Cabinet Secretary Yoshihide Suga said at a regular briefing.
“While examining the cause of the incident and taking necessary measures, we want the ministries and agencies concerned to urgently study what further measures we’d need,” Suga said.
Japanese Minister of Finance Taro Aso told the Japanese Diet that the government would take “necessary administrative measures, including an on-site inspection.”
Coincheck “did not store the important things separately. I think they lacked fundamental knowledge or common sense,” he said.
One unit of NEM was trading at US$0.95 at about 07:30am GMT on Monday, according to coinmarketcap.com.
Japan is a leading market for cryptocurrencies, with nearly one-third of global bitcoin transactions last month denominated in yen, according to specialist Web site jpbitcoin.com.
As many as 10,000 businesses in Japan are thought to accept bitcoin, and bitFlyer — the country’s main bitcoin exchange — in November saw its user base grow to more than 1 million.
Many Japanese, especially younger investors, have been seduced by the idea of strong profits as the economy has seen years of ultra-low interest rates offering little in the way of traditional returns.
In the wake of the MtGox scandal, Japan passed a law on cryptocurrencies that requires exchanges to be regulated by the FSA. The law went into effect last year.
Coincheck had submitted an application to the FSA for a license and was allowed to continue operating while it awaited a decision, the agency said.
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