When Coincheck was hacked a while back, it sent shockwaves through the digital currency markets. The total value of losses was huge. Hackers managed to get away with over $500 million in digital coins. Initially, regulators only gave the exchange an admonition. However, due to the severity of the hack, the FSA have now raided the offices of the exchange.
What They Promised
When the hack occurred, the exchange said it would refund $425 million or about 90% of all funds to the 260,000 users who were affected. Most users were quite happy with this, as it was far better than getting nothing back. Consequently, the authorities took no major action against the exchange. Essentially, they ordered them to put measures in place to avoid such attacks in future. They were also asked to prepare a report and present it to the FSA by February 13th 2018.
However, it would seem the FSA has since reconsidered. They decided to raid the offices of the exchange to ensure that they had the funds needed to make good on their promise. This is especially so for funds that will be paid in yen rather than virtual currencies.
Besides this, regulators wanted to confirm that the exchange had put the necessary measures in place. They also wanted to learn how exactly the hack had occurred. One reason the hack succeeded was that the exchange stored assets on a system that was connected to the Internet at all times. The raid was the first time the government have taken such action against an exchange. According to the Finance Minister,
The investigation is being conducted to protect the current users.
The Raid Was Necessary
This raid by the authorities makes a lot of sense. This show of force may help to deter other exchanges that may have been slacking on the security measures they have in place. It will also help bolster investor confidence in Japanese exchanges. Even as China and other countries continue to crack down on exchanges, Japan is reaping rewards from the thriving cryptocurrency business.
The country has put in place various legislation to legitimize cryptocoins, going so far as to recognize Bitcoin as an accepted form of payment. This has led to major businesses throughout Japan accepting cryptocurrencies as payment for goods and services. The best outcome for this incident would be that everything is resolved for everyone concerned. However, the Coincheck exchange is going to have to shoulder the burden of compensation costs.