Japan’s FSA to Heighten Scrutiny of Exchanges Amidst Coincheck Hacking

The financial services agency (FSA), in Japan, has made a decision to scrutinize more crypto exchanges in the country. This follows after Coincheck was infiltrated and hackers parted with more than $530 million worth of NEM tokens, at the time of the heist. The heist was majorly due to the fact that Coincheck did not set up strong security procedures, since they kept the tokens in an online wallet. Online wallets have one major disadvantage; they can be easily hacked. If the tokens were stored in a cold wallet, which is not connected to the internet, this massive heist would not have seen the light of the day. The FSA looks to achieve three major things by increasing the number of raids across all crypto exchanges in Japan.

Secure crypto exchanges

The FSA, plans to audit and test the security procedures used by the 32 exchanges operating within the country. They will be able to gauge how secure those exchanges are, and give them a greenlight. This will help to minimize, if not eliminate, any kind of intrusion and thus loss of money by both exchanges and investors. Before the heist, the FSA had issued a warning to Coincheck that it was prone to intrusion due to weak security procedures. However, they ignored that warning which led to a huge loss.

For all exchanges to register with FSA

Not all exchanges operating in Japan are registered with the FSA. According to Nikkei, only half of those are registered with the country’s regulator, which puts the rest at a greater risk, when it comes to security. Coincheck is one of those exchanges which is not registered with the regulator. This is due to the fact that the exchange was started when the cryptocurrency laws were not in operation.

Investor confidence

Inspections by FSA will help to protect investors and thus build their confidence when dealing with FSA approved exchanges. The regulator will help analyze the liquidity of those exchanges to see whether they have the ability to refund their investors in case they lost all the funds. This was seen when they stormed Coincheck about a week ago to evaluate their promise of refunding investors who suffered the loss during the heist.

The question of how secure a crypto exchange is, can be a grey area for a regular investor. However, with a regulator like the Japan’s FSA, investors can trust exchange operators who are FSA approved.