Japanese cryptocurrency regulations are about to tighten in a bid to enhance investor protection and safeguard security in the wake of recent hacking attempts.
The Japan Times has reported that the nation’s self-regulating body will implement self-imposed measures to curtail ongoing security issues that culminated in investors losing vast amounts of money that totalled close to ¥7 billion yen ($61 million) in recent months.
The Japan Virtual Currency Exchange Association (JVCEA) are currently revising and revamping Japanese cryptocurrency regulations in regards to the management of customer assets. JVCEA are allegedly planning to impose a limit on the number of cryptocurrencies that can be managed online by customers – the cap is reportedly going to be around 10% to 20% of deposits from customers.
The revision of the rules that were originally drawn up in July will be completed once they have received the go-ahead from the Financial Services Agency.
The scramble to amend Japanese cryptocurrency laws is in response to recent hacking attempts that saw cryptocurrencies to the tune of $61 million stolen from the Osaka-based crypto exchange called Zaif that is operated by the Tech Bureau Corp. Approximately $40 million was stolen directly from the customers at Tech Bureau, all of which was managed online, making it simple for hackers to steal.
This is also on the back of another major hacking attempt in January when the customers of the market-leading crypto exchange, Coincheck, suffered a $500 million hack in NEM. It has been a rough year for Japanese cryptocurrency exchanges in regards to hacking attempts.
Crypto exchanges best practice is to store the majority, if not all of their cryptocurrencies in cold storage, however, many exchanges keep some assets online so transactions can be swiftly performed, which makes them more vulnerable to hacking.
The Japan Times reported that their industry sources suspect Tech Bureau had unwittingly left a large proportion of their cryptocurrency in hot wallets. Some critics doubt the self-regulatory rules from the JVCEA are sufficient to make meaningful change, meaning the Japanese FSA will likely have to make more stringent policies.