Japan to Prevent Digital Currency Theft by Imposing Strict New Standards
Back in April 2017, digital currencies were accepted in Japan as a legal method of payment, this made Japan one of the most supportive nations of the developing cryptocurrency economy. In January this year, NEM tokens worth over half a billion dollars were stolen by hackers in an attack on Coincheck – a Japanese digital currency exchange platform.
What the Japanese Government Is Doing About the Security of Cryptocurrency
Since the attack on Coincheck, which was also accompanied by the collapse of MtGox (an exchange platform based in Tokyo), the government of Japan has been working very hard to protect digital currency investors in Japan. In April, the Financial Services Agency said they need to introduce a new perspective in registrations reviews.
The Registration Process
The process of registration would go beyond just documentation. They said they would include preparatory visits carried out detailed investigations into the management of operations.
Digital currency exchange platforms need to register with the government of Japan through the Financial Services Agency and they will be subjected to the following vital requirement criteria.
• Japan-based cryptocurrency exchanges will have firmer standards on system management, they will also have to use cold storage of the digital currency they hold. This means they can’t store the digital currencies on a computer that is connected to the internet.
Also they will have to make sure that all their transactions utilize multiple authentication methods. In the case of Coincheck, the stolen digital currency was stored in a “hot wallet.”
• The identities of customers will have to be verified for large transfers; this is to prevent money laundering.
• The assets of customers will need to be managed distinctly from the assets of the exchanges, and they also have to make sure that staffs won’t be able to use customer funds.
• Along the line, some digital currencies will be banned – coins with high anonymity level.
These regulations are likely to be implemented in the next couple of months for both new and existing exchanges.