Published: Wed, January 31, 2018

Hack hits crypto currency

Hack hits crypto currency

Japan's Financial Services Agency had introduced a licensing system for cryptocurrency exchanges last April.

The Saturday warning came after some 58 billion yen ($534 million) in customers' virtual currency holdings was stolen from Coincheck, a Tokyo-based cryptocurrency exchange, on Friday. Regulators around the world have warned about the dangers of investing money in digital currencies, citing concerns about security and extreme volatility.

On Sunday, the exchange agreed it would reimburse about 90 percent of internal funds. Reports suggested that it may soon conduct an on-site inspection.

In its letter, the FSA warned that more large-scale cyberattacks could be mounted against cryptocurrency exchanges.

Coincheck has apologized and promised to reimburse customers for their NEM losses. The FSA said there were now 16 registered exchanges and 16 waiting for approval while operating.

"Unified threats articulated by a chorus of financial heavyweights on cryptocurrency regulations during the Davos conference, have exposed Bitcoin to significant downside risks", said Otunuga. The exchange said it has been in touch with Japan's Financial Services Authority and the Tokyo Metropolitan Police. For Coincheck, stepping up their game is of the utmost importance right now. In December it began airing commercials on national television featuring a popular comedian.


The scandal has triggered an immediate public backlash.

Hackers are said to have breached the CoinCheck servers at about 2:57 on Friday but it wasn't until about 8-9 hours post the hack that the exchange discovered about it.

The theft in Japan caused an uproar in social media and clients gathered in front of Coincheck headquarters after discovery. But it will also introduce bureaucracy and dilute the libertarian ethos of less government that gave birth to virtual currencies.

Token holders should take this as a reminder that the only way to keep their assets secured is to store them in a crypto wallet that provides them with their private keys.

Apparently the Coincheck assets stolen were in a "hot wallet", that is part of the exchange connected to the internet, as opposed to a "cold wallet" where assets are stored securely offline. The crypto market has seen some rough news break, such as the loss of funds in both Parity hacks, but the scale of loss has not been seen since Mt. Gox in 2009, when roughly $460 million worth of BTC were lost. But the licensing requirement didn't stop the operation of pre-existing exchanges, some of which had already become the largest ones. Coincheck subsequently restricted deposits and withdrawals of most currencies pending investigation and resolution of the problems. No one knows who owns the accounts that the coins were transferred to, but each has been labeled with an automated tracking tag that reads "coincheck_stolen_funds_do_not_accept_trades: owner_of_this_account_is_hacker". It said it has shown exchanges how to check if an account has been tagged to prevent stolen funds from being cashed or converted to other cryptocurrencies.

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