The Japanese Financial Services Agency (FSA) is expected to impose stricter standards on any cryptocurrency exchange who is registered or wants to operate in the country. This is in order to prevent another heist similar to the Coincheck hack. Hacks on cryptocurrency exchanges occur globally on a frequent basis and in Japan, Coincheck’s hack was the largest singly hack on record.
While multiple exchanges have shown every intention of doing right by their investors, some still have poor internal security standards and checks. Several known cases in cryptocurrency thefts have occured. This was the main reason cited as to why Coincheck, suffered it’s debilitating cyberattack. Ultimately it was blamed for having poor security standards.
Coincheck, which is based in Tokyo, faced interrogations by the FSA which demanded immediate improvements. The situation forced Japanese regulators to scrutinise the entire sector and review all cryptocurrency exchanges and monitor them more closely. “We need to introduce a new perspective in reviews of registrations,” said an FSA official.
According to the Nikkei, cryptocurrency exchanges will need to meet a set of criteria in order to legally operate. Regulatory oversight compliance with data protection standards and preliminary visits to organizations are some of the new measures that will be enforced. Officials must make sure they are not simply schemes designed to dupe investors.
Strict standards for system management and the use of cold wallets rather than hot wallets ensures investor funds must be stored on a connected system seperate from the internet. In addition, multiple passwords must be imposed for cryptocurrency transfers. One of the new requirements is designed to prevent money laundering. The FSA is enforcing that exchanges must store the verification records when they identify users and customer accounts must be monitored on a daily basis for signs of suspicious activity.
This new framework will allow the FSA to monitor and assess the legitimacy and risks of existing and new cryptocurrency exchanges. The new rules proposed by the FSA are expected to come enforce by the summer.