![]() Back on September 13, 2017, Coincheck announced that it had been approved as a licensed cryptocurrency exchange and that its registration and approval were compliant with Article 63–3 of the National Fund Clearing Algorithm. ![]() Its recent monthly transaction volume has reached 26 million US dollars, and its compliance review for listings is stricter than in any other country in the world. ![]() It is a registered institution of the Kanto Regional Finance Bureau №014 of the Japanese Virtual Currency Exchange Association. Investors need to find out how much any customer payback is going to really cost the firm.The Coincheck Exchange belongs to the Monex Group, which is listed on the Tokyo Stock Exchange. Will they be the lucky spouse in a "shotgun wedding" arranged by Japan's FSA? Time will tell, but many more details need to be known before customers see any funds returned. Do they financially punish Coincheck hard and force a closedown or merger into a bigger fully licensed parent? The safest and most compliant licensed exchange in Japan seems to be bitFlyer, which has full compliance now in place for Japan, the US and even Europe. Actions need to be taken.Īt this point, the ball is now in the regulator's court. One crypto exchange flew the global CEO over to Tokyo, and landed on Monday January 29, to be right "on the ground" and be able to direct crisis management personally. Over the weekend, many rival exchanges had staff in overtime to counteract any similar potential threat and review counter-hacking systems. Many licensed and unlicensed exchanges now expect more "guidance" from the regulator (AKA a clear order) to clean up customer fund storage procedures. The Japanese FSA had an early Monday morning January 29 meeting with executives from Coincheck, and now have until Feb 13 to explain the incident in clear detail. When you work in any cryptocurrency exchange, stealing (with help from the inside or not like MtGox), needs a new catchphrase like "crypto shrinkage" perhaps? Any business owner knows that inventory "shrinkage" is a nice word for internal stealing of products within retail stores. However, how to put proper controls of customer funds into any cold wallet storage, quickly and safely, seems another challenge in the recovery.Ĭompanies make mistakes everyday, but when there are no reasonable limits on internal flows of over USD500Million, ( Half a Billion Dollars!) moving out the door, that seems more like incompetence. Being understaffed and not able to attract the right talent is a real business problem. If a firm like Coincheck explained in a news conference late Friday evening at 11:30pm to irate reporters, that they were understaffed, more customer service requests for repayment of lost funds will not help. No details on how to apply for them have been given either. No details were given on how exactly "how" you suddenly find that amount in cash, over a weekend, then convert it, and pay it back to customers. In fact a figure of 90% or so was pledged. It soon pledged to pay back most of their customer's stolen funds. Later that weekend, Coincheck came up with a figure from the heist, around USD530Million in value. It keeps customer funds "offline" if you will, with no direct hacking possible from any hacking team (like those North Korea) near your funds. The cold wallet storage style needs more personnel and more cost to maintain. This is what many have discovered last week. However, it is still linked to the internet and therefore easier to steal and hack from. If an exchange keeps customer funds in a hot wallet format, it is easier and more simple to service. The main issue for customer safety seems to be a "hot wallet" vs "cold wallet" storage choice. Around 10+ exchanges are in "process" of getting a license from Japan's FSA, but the bar just got raised. Another 5 got licenses in December 2017, but Coincheck was not one of the licensed 16 in Japan. Customer service needs bodies, and Coincheck did not have many staff to spare when various emails, tweets and telephone calls came in asking for answers.Īs far as background, on September 29, 2017, 11 crypto exchanges got licenses from Japan's FSA. Many learned from a Twitter post that the cryptocurrency exchange called Coincheck had suspended many accounts and withdrawals, except curiously for Bitcoin. To the 260,00+ customers of Coincheck, January 26, was not a good Friday.
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