In the same week that, Zaif, a crypto exchange in Japan, was hacked, losing nearly $60 million in user funds, the country’s National Police Agency has announced that 60.503 billion yen ($540 million) worth of crypto was stolen in Japan during the first six months of 2018.
According to a report by The Asahi Shumbun, the worst case, in January, siphoned 58 billion yen from cryptocurrency exchange Coincheck. The remaining 2.5 billion yen did not involve exchanges, but mainly illegal accessing of individual cryptocurrency accounts.
The number of reported incidents came to 158, triple the figure for the same period in 2017. Total seizures far exceeded that for all of last year, when about 662.4 million yen was stolen over the internet in 149 cases.
More than 60% of all cases, or 102 incidents, involved individuals who used the same ID and password for their e-mail account and other internet services, such as online shopping, for cryptocurrency dealings.
The most targeted cryptocurrencies were Bitcoin, where the equivalent of 860 million yen was seized in 94 cases, and Ripple, which involved 1.52 billion yen in 42 cases. Losses in NEM cryptocurrency, which was at the centre of the Coincheck case, as well as other cryptocurrencies, totalled 58.062 billion yen in 36 cases. There were 14 cases of Ethereum cryptocurrency theft, with losses of about 61 million yen.
FSA
Japan’s financial regulator, the Financial Services Agency (FSA), has said it would like the cryptocurrency industry to grow “under appropriate regulation”.
In a recent interview with Reuters, FSA Commissioner Toshihide Endo claimed the regulator had no intention to curb the crypto industry excessively. Instead, it was trying to strike a balance between protecting consumers and promoting technological innovation.
Crypto first
Last year, Japan became the first country to regulate cryptocurrency exchanges. The FSA started clamping down on the industry following the aforementioned theft from Tokyo-based Coincheck in January.
A series of FSA inspections uncovered poor management and a lack of basic internal controls at several exchanges. As a result, some exchanges were ordered to temporarily suspend operations.
The FSA is also thought to be refining its regulatory framework around cryptocurrency exchanges in order to boost consumer protection and better secure investor assets. It considers the current consumer protection mechanisms afford by the Payment Services Act to be insufficient, according to local publication Sankei.
The review could see crypto exchanges being brought into the realm of Japan’s Financial Instruments and Exchange Act, which requires traditional securities firms and stock brokerages to manage customer funds and securities separately from corporate assets. This shift could result in cryptocurrencies being classified as a financial product, giving them exposure to mainstream financial markets.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.