Japan’s Financial Services Agency (FSA) Urge Crypto Exchanges To Tighten Cold Wallets Security
Japan’s financial watchdog, the Financial Services Agency (FSA) has urged cryptocurrency exchanges to strengthen the security of their offline crypto wallets also known as cold wallets, according to a Reuters report on April 16, 2019.
FSA Focused On Mitigating Crypto Risks
Per sources close to the matter, the Financial Services Agency (FSA) of Japan has called on all bitcoin trading venues and cryptocurrency exchanges in the region to tighten the security of their cold wallets.
The latest move by the FSA is aimed at curbing the activities of crypto thieves who will not at no length to enrich themselves with crypto assets gotten from the coffers of crypto exchanges.
In recent times, bad actors have taken advantage of the crypto-friendly nature of Japan to carry out unlawful activities to the detriment of exchanges and cryptocurrency traders.
In January 2018, Coincheck, a leading Japanese crypto trading platform got attacked by hackers who succeeded in stealing half a billion dollar worth of funds stored on the exchange’s hot wallet.
In September 2018, Zaif, a licensed Japanese exchange also lost $60 million to hackers.
Following the incessant security breaches of cryptocurrency exchanges in the state, the regulator made it compulsory for exchanges to store a large chunk of their funds in offline wallets since this storage method makes it impossible for hackers to gain access to users’ funds.
Eliminating Risks Of Internal Thefts
Despite the fact that the regulator has made it mandatory for exchanges to use cold wallets more extensively, the FSA has since discovered that there are still dangerous loopholes in the operations of local exchanges, since a vast majority of the crypto trading venues have failed to formulate rules that would make it impossible for only one person to be in charge of the offline wallets.
As such, it is very possible for a disgruntled insider to steal the funds contained in the cold wallet and act as if he/she is unaware of the incident.
Against that backdrop, it is believed that the FSA will soon order several licensed exchanges in Japan to strengthen their platform and update their security policies in order to fix this significant flaw.
Japan has always had a liberal stance towards bitcoin and other digital assets, unlike its Chinese neighbours who have since placed a blanket ban on crypto trading and rumors are rife that the nation could also flush out crypto miners from the region.
Since becoming the first nation to regulate bitcoin and altcoins in 2017, Japan has become a hotbed for digital assets and distributed ledger technology (DLT), with several firms accepting cryptos as legal tender in the state.
At current, there are 19 FSA licensed cryptocurrency exchanges and trading venues in Japan and the regulator is still reviewing the applications of nearly 200 companies interested in launching crypto and blockchain-related businesses in the country.