Following the Mt. Gox incident, Japan passed a series of regulations aimed at preventing such a heist from happening again. Fast forward to 2018, and another massive breach has taken place, this time with even more capital lost.
Japanese authorities are looking at the incident with a sense of slight panic. The government is split on whether or not to press for more regulation on the local fintech and cryptocurrency scenes.
On the one hand, we have people like Mineyuki Fukuda, Japan’s former information technology vice-minister, who is adamant about leaving the fintech industry alone, the Coincheck incident notwithstanding.
“It's too much to say that the [Financial Services Agency] or institutional design was lax because there was one hack,” he said.
On the other hand, we have the FSA itself, which is seeking technical advice from a special industry body known as the Japan Authority of Digital Assets (JADA).
JADA founding member So Saito said that the organization had given the FSA “technical information and ideas” regarding solutions that would prevent a repeat of the Coincheck or Mt. Gox incidents.
Over a week ago, Japanese authorities raided Coincheck’s premises to investigate the details of the breach and hopefully discover what could stop another attack of such scale from happening.
In the midst of the scandal, the FSA came under scrutiny because of the lack of oversight regarding Coincheck’s registration. The agency opted to grant the exchange a provisional license, which had it operating legally even though it did not get approval under Japanese regulations.
After the attack, it is likely that the idea of offering provisional licenses to exchanges will come into question.
Regarding Coincheck’s registration, FSA representatives said they did not grant full approval because of weaknesses found in the operator’s systems. Nonetheless, the exchange continued to operate and eventually suffered the attack that left its customers nursing collective losses of more than half a billion dollars.