Japan’s financial regulators have heightened their scrutiny over local cryptocurrency exchanges following the hack of Japanese digital asset trading platform, Zaif, on September 19th. As covered, the hack resulted in a loss of nearly $60 million in cryptocurrency including almost 6,000 Bitcoin (BTC).
According to a September 25th announcement by Japan’s Ministry of Finance, Zaif exchange (operated by Osaka-based Tech Bureau Group) has been hit with “administrative penalties” as part of a business improvement order requiring the exchange to investigate the recent hack.
As one of sixteen crypto exchanges currently licensed by Japan’s Financial Services Agency (FSA), Zaif will now have to determine how the security of their platform was compromised. Additionally, the exchange will have to formulate preventive measures as soon as possible in order to prevent future hacks.
Damage Assessment, Claims Process
Other administrative penalties from the FSA require that Zaif communicate effectively and in a timely manner with the victims of the hack. Ranked among the world’s top 40 digital currency exchanges in terms of trading volume, Zaif has also been instructed to help the victims assess the damage or amount of funds they’ve lost as a result of the security breach – presumably in an attempt to initiate a claims process.
Founded in June of 2014 after raising $21.7 million in starting capital, Tech Bureau, Inc.’s recent business improvement order is its third in a span of only 3 months. In its disclosure statement following the hack, Tech Bureau reported that it had lost 6.7 billion Japanese yen (JPY) – approximately $60 million in Bitcoin (BTC), Bitcoin Cash (BCH), and Monacoin (MONA).
The huge amount of digital currency was reportedly stolen from Zaif’s hot wallets. In an attempt to reimburse the victims of the hack, Tech Bureau has approached a publicly-listed financial firm by offering to sell it the majority of its shares for 5 billion JPY (appr. $45 million).
Selling Company Shares
According to Tech Bureau, it plans to use these funds to reimburse an estimated 4.5 billion JPY (appr. $40 million) lost from customers’ crypto balances. As covered on CryptoGlobe, 160 new exchanges intend to enter Japan’s digital currency market, the FSA revealed in late August.
Despite numerous hacks of crypto exchanges, the FSA appears to have progressive crypto regulations in place as it has permitted Coincheck (now acquired by Japanese broker Monex Group) to operate – even after over $530 million in NEM tokens were stolen from its exchange due to a security breach in late January of this year.
The FSA’s approach to regulating crypto firms in Japan appears to be focused on making sure businesses are adhering to best practices. Throughout this year, the financial regulator has performed many onsite inspections of local cryptocurrency exchanges in order to make sure their operations are in compliance with its regulatory policies.