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The Japanese government said today that inspections will take place at 15 unlicensed cryptocurrency exchanges in light of a recent major hack.
According to the Japan Times, the country’s financial services minister Taro Aso said at a news briefing that on-site inspections will take place at the exchange providers that have filed for licenses but not yet been approved.
The move comes after the Coincheck exchange lost NEM tokens worth $533 million at the time in a major breach in late January.
The minister indicated the inspections will examine the exchanges’ technical safety procedures and management of users’ funds, the report indicates.
The country’s financial watchdog, the Financial Services Agency (FSA), had previously ordered all the licensed and unlicensed exchanges in the country to report on their security protocols and resistance to hacking in response to the Coincheck theft. The FSA has now decided that on-site inspections are required for unlicensed operators after appraising their reports.
The Japanese system for licensing exchanges came about after the country amended its payments laws recognizing cryptocurrencies as a legal payment method in April 2017.
Notably, Coincheck had not been approved by the FSA but had been allowed to continue operating while the review process was continuing.
According to a report from Nikkei, the authority ordered the exchange to launch an investigation into its security vulnerabilities that led to the hack, and to submit a report for management improvement to the authority. The FSA said at the time, “Inappropriate management of system risks had become the norm at Coincheck.”
The FSA earlier this week issued a warning to a foreign cryptocurrency service firm that allegedly offers unlicensed financial instruments. The move marked the first time regulators in Japan had issued a warning over a cryptocurrency services company since the country legalized bitcoin as a payment method.
Japanese flag image via Shutterstock
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