Cryptocurrency exchanges in Japan set up self-regulatory body

At the moment, the Japanese government have given operational licenses to a total of 16 cryptocurrency exchanges. An announcement from a government spokesperson this week has stated that they will be working together to create a self-regulatory body with the aim of increasing trust in the cryptocurrency industry.

This news has been welcomed after a recent hack of the Coincheck exchange in January which saw around $530 million worth of NEM being stolen, making it the largest cryptocurrency hack ever.

As of yet, no name has been proposed for the proposed organisation and no date of establishment has been announced and it seems that even the scope of its powers must still be decided.

Back in 2017, Japan became the first country in the world to oversee the transfer and exchange of cryptocurrencies at a national level. The government gave licenses to 16 exchanges and gave permission to a further 16- including Coincheck- to continue their operations whilst their applications for approval were pending with the regulators.

The Japanese Financial Services Agency (FSA) listed the first 11 exchanges last September and by early December, they announced the licensing of another four, and then the 16th by the end of 2017.

Shortly after the hack, the FSA then issued a business improvement order to Coincheck and ordered the company to provide a comprehensive report on the hack, including their proposed measures to ensure that a reoccurrence would not happen. The FSA also carried out on-site inspections of the exchanges premises to ascertain that client’s funds were correctly safeguarded.

On February 13th, Coincheck restarted yen withdrawals and over $371 million was withdrawn within the first 24 hours. Whilst Coincheck has promised that it will reimburse all customers that were affected by the hack, they have not yet provided any details on how, or when it intends to do so. COO, Yusuke Otsuka stated that “We have the funds, but we are making individual checks so there are no problems.” although this has done little to reassure the community as many believe that the company does not have the ability to pay out that amount in a timely manner.

The FSA has also ordered internal inspections of all other cryptocurrency exchanges in Japan in order to asses the strength of their cyber security measures.

It is hoped that the creation of a regulatory body created with the collaboration of all Japan’s cryptocurrency exchanges, should provide a vote of confidence to financial regulators and to those whose faith in the cryptocurrency industry has taken a hit after the hack.

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