Japanese Regulator to Pay Surprise Visits to Crypto Exchange Operators

Japan's Financial Services Agency (FSA) will start inspecting cryptocurrency exchanges in the country to monitor their security policies.

Japan’s Financial Services Agency (FSA) will conduct on-site inspections at several digital currency exchange operators this week to determine if they can withstand hacker attacks, an anonymous inside source told Reuters on Thursday. The plan follows last Friday’s FSA raid on CoinCheck after hackers stole an estimated $530 million in digital money from the Tokyo-based operator.

In the wake of the CoinCheck incident, the agency said it had demanded that Japan’s other 31 crypto exchanges file reports on their system risk management and cryptocurrency storage. The FSA also said at the time it would pay surprise visits to business premises if any vulnerabilities came to light.

According to the source, the FSA scheduled the inspections at several operators after studying their reports. Depending on what the others reveal, the regulator may expand the reach of its operation.

FSA raids CoinCheck’s office

FSA inspectors raided the offices of CoinCheck last week to monitor the operator’s response to the real-time crypto heist, as well as to check its security governance policies. The theft of some 523 million XEM currency units in late January has put FSA in the spotlight for allowing CoinCheck to operate with only a provisional license.

The exchange has pledged to reimburse the 260,000 clients affected by the hack. However, it remains uncertain how the company plans to do it.

South Korea suspects involvement of North Korean hackers

In a related development, the South Korean National Intelligence Service (NIS) said on Tuesday that North Korean hackers might have orchestrated the attack on CoinCheck. An unidentified NIS official  told Reuters that “it’s possible, but not a probable scenario backed by evidence.”

This statement was backed by Kim Byung-kee, a member of the parliamentary intelligence committee, who recalled similar attacks in the past on Seoul’s crypto exchanges by perpetrators from the North.

Kim stated:

“North Korea sent emails that could hack into cryptocurrency exchanges and their customers’ private information and stole [cryptocurrency] worth billions of won.”

Meanwhile, Japanese chief cabinet secretary Yoshihide Suga said that Tokyo is in the process of gathering information to determine North Korea’s cyber-attack capabilities. He did not elaborate on the information collected so far.

“We acknowledge how we deal with cyberattack is an important issue for our nation's security, crisis management, and the economic growth. We would like to respond in cooperation with the international community with a sense of urgency," he was quoted as saying.