Japanese exchange to reimburse its customers with $425 million. Recently, a cryptocurrency exchange by the name of Coincheck was hacked and over $ 425 million were stolen from it in the form of cryptocurrencies. The exchange since then suspended the withdrawals with the sole exception of Bitcoin.
The exchange further stated that it would be reimbursing the holders of the NEM coins. It is currently working on the modalities of reimbursement.
Even though the exchange might reimburse the customers but one thing which this event highlight is that there is an amount of risk when it comes to investing in cryptocurrencies. This is the biggest such hacking attempt which has been successful in the cryptocurrency space.
Even the financial regulators of Japan are actually taking note of the situation since the amount of money which is involved is significant as well. Also, the authorities are deciding whether any punishment should be levied on the exchange or not.
From April 2017, the Japanese government made it compulsory for the cryptocurrency exchanges to register with the authorities. However, the older cryptocurrency exchanges like this one, just continued their operations while their application was pending with the authorities.
According to the exchange, the NEM coins were actually stored in a hot wallet rather than a cold wallet. Owing to this very reason, the hackers were able to easily access them as well. According to the president of the company Koichiro Wada, this was done due to the technical difficulties faced by the exchange as well as the shortage of staff.
There are precedents when hacking has led to closing down of large cryptocurrency exchanges in the past as well. The most notable among them being of Mt. Gox which was another Tokyo-based cryptocurrency exchange which handled 80% of the Bitcoin trading volumes. It filed for bankruptcy after half a billion worth of Bitcoins were hacked from it. Similarly, in South Korea as well Youbit actually filed for bankruptcy due to hacking attempts and losing money in the last year.
This significantly highlights the risk in trading in cryptocurrencies. Owing to this very reason, the investors need to be aware of the security which is provided by the cryptocurrency exchange. Moreover, they have to only choose the most secured cryptocurrency exchange. It is always a good idea to opt for a cryptocurrency exchange which uses a cold wallet system in order to store the money. Only once investors are able to choose the right exchange, it would be completely safe for them to invest in cryptocurrencies.