The Japanese Financial Services Agency (FSA) stated on Thursday 8th that it has suspended two cryptocurrency exchanges. Each suspension is a month long and starts from today. The suspension has been ordered as the result of poor security and compliance standards.
Bit Station and FSHO were the exchanges that had trading halted for a month. However, 5 other exchanges came under fire from the FSA and must produce and submit a ‘Security Improvement Plan’ by March 22nd.
The FSA found these five exchanges to have insufficient security measures. Those five exchanges are Tech Bureau, GMO Coin, Mister Exchange, Bicrements as well as Coincheck.
Coincheck suffered one of the worst cyber heists in history in late January this year. Over $500 million in NEM were stolen. It is thought that the heist prompted Japanese regulators to conduct more thorough checks of all crypto exchanges in the country. The Coincheck CEO Koichiro Wada even agreed with the FSA decisions and said that the current systems:
“Weren’t in keeping with the expansion of our business”
Coincheck said a hacker used malware to infiltrate the network, the hacker then proceeded to steal an encrypted key which was used to transfer coins out of the exchange. Despite claiming to store the majority of their funds in ‘cold storage’, the coins were stolen from ‘hot wallets’ which are exposed to the internet making the coins more vulnerable.
According to an article from Reuters, many of the exchanges in Japan are unregistered with the FSA.
“It’s problematic that these 16 unregistered exchanges have been able to continue trading... In the first place, should they have been allowed to operate while their applications for registrations are still incomplete?”
It is not just the unregistered exchanges that have been deemed to fall short in security measures. The FAS found that GMO Coin, a registered exchange, was suffering system glitches frequently and the exchange was unable to identify the root cause of the glitch. It is the FSA's hope that, by ordering security reports for March 22nd, another possible Coincheck scenario can be avoided.