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Japan’s Finance Watchdog Says Coincheck Must Report on Security Failures

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Japan’s financial watchdog is taking more security measures after the much talked about hack of the Japanese cryptocurrency exchange, Coincheck.

The Coincheck hack, which was revealed late last week after the exchange had tersely stopped most of its services, saw the theft of about 500 million XEM – the token of the NEM network – which was estimated at $420 million at the time.

According to the latest update from Coincheck, Japan’s Financial Services Agency (FSA) has mandated the exchange to initiate an investigation into its security weaknesses that resulted in the hack, and to immediately submit a report for management improvement to the authority by February 13.

The FSA said the company is also required to report details regarding the facts and causes of the issue.

Coincheck said in a press release:

“Coin Check Co., Ltd. received a business improvement order from the Financial Services Agency under the Article 63-16 of the Law Concerning Funds Payment Today in connection with illegal remittance of the virtual currency NEM due to unauthorized access recently occurred.

“We take seriously and sincerely this measure, we deeply reflect on it, and at the earliest, strengthen the management control system related to fact facts relating to the case and cause investigation, customer protection, system risk management system, and effective system We are planning to develop a risk management system and formulate measures to prevent recurrence.”

According to a report from Nikkei today, the authority announced the order came during a press conference, saying, “Inappropriate management of system risks had become the norm at Coincheck.”

The report also indicated that the agency is developing its investigations, including on-site examinations at other cryptocurrency exchanges in Japan to prevent a reoccurrence of the issue.

In an earlier statement, the NEM.io Foundation also proposed a lack of security precautions at Coincheck may have led to the hack.

“We would advise all exchanges to make use of our multi-signature smart contract which is among the best in the landscape. Coincheck didn’t use them and that’s why they could have been hacked. They were very relaxed with their security measure,” remarked Lon Wong, the foundation’s president.

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