Japan is at the forefront of trying to create a legal infrastructure for the cryptocurrency exchanges. Also, Japanese regulators are even conducting on-site inspections for most of the cryptocurrency exchanges. According to a news report, the financial services agency of Japan is likely to increase the frequency of these inspections in order to keep a strict watch on cryptocurrency exchanges.
This news comes in the backdrop of the biggest cryptocurrency hack at one of a Japanese exchange by the name of Coincheck. It is rumored that the Japanese exchanges and regulators would actually look into the storage of cryptocurrencies as well. This is aimed at avoiding another such incident of hacking.
In the last 10 days, coins over $ 531 million were stolen from Coincheck. The main reason why the hackers were able to steal such a significant number of coins was that they were stored in hot storage rather than cold storage as was claimed by the exchange. The agency further stated that it had warned the exchange about the loopholes in its security previously as well. This is one of the main reasons why the exchange has still not been able to obtain a proper approval from the authorities.
The growth of cryptocurrency exchanges in Japan is enormous. There are quite a few domestic exchanges. In addition to that, a number of investors are also rising significantly. This is one of the main reasons why most of the cryptocurrency exchanges in Japan are not able to handle the growth properly. As a result, they are not able to invest in security measures and neither have they had the power of employees to execute all the security measures as well. This is resulting in more and more risk for the cryptocurrency investors.
Around half the number of Japanese domestic cryptocurrency exchanges are not yet registered with the agency. With that being said, investors are still using these cryptocurrency exchanges in order to invest in cryptocurrencies. Thus, these investors are actually at high risk of losing their capital should such a hack occur once again. This is one of the main reasons why the agency has decided to increase the frequency of inspections. This would also increase the detection of such loopholes which can result in a hack. Owing to this very reason, it is actually in the interest of the investors of the agency indeed increases the checks as well as the frequency of the checks.