From: Institute for Defense Studies and Analyses
One of Japan’s largest cryptocurrency exchanges, Coincheck,1 reported a hack on January 26, with losses amounting to around USD 534 million (58 billion Yen) worth of the cryptocurrency XEM. Dubbed as one of the largest cryptocurrency heists till date, it has exposed the under-preparedness of regulators in curbing hi-tech crimes and safeguarding consumers from such untoward incidents. The heist is also a major blow to Japanese aspirations to boost economic growth by harnessing innovations in the next generation of Financial Technology (Fintech). As a clear departure from the conservative approach adopted by other countries on cryptocurrencies, Japan has the early mover advantage of providing a conducive environment for the growth of cryptocurrencies as a niche market.
In 2017, the Japanese Financial Services Agency (JFSA) had granted approval for 16 cryptocurrency exchanges to operate in the country. Japan became the first country in the world to recognize Bitcoin as a legal tender. Amendments to Japan’s Bank Act and the Payment Services Act2 in 2016 legitimised the use of cryptocurrencies as payment instruments for both goods and services. In a setback, the heist of January 26 has victimised 260,000 Coincheck customers. Further, it has refreshed the dreadful memories of the 2014 hack on the Tokyo based Mt Gox exchange (losses estimated at USD 474 million at that time),3 which had pushed the world’s largest Bitcoin exchange into bankruptcy. Despite rigorous regulatory requirements and oversight, Japan has fallen victim to another major cryptocurrency hacking incident.
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