Following the largest hack in cryptocurrency history, in which Coincheck lost over $530,000,000 in customer funds due to poorly secured wallets, the exchange is now under the scrutiny of the Financial Services Agency, a government agency and financial regulator responsible for ensuring the stability of Japan’s financial system.
According to Coincheck itself, who announced the order by the financial watchdog yesterday, the company has received an order to improve their business operation, according to the Payment Services Act defined in Article 63-16. The official announcement reads:
“We earnestly accept the terms of the order and vow to re-examine our business practices while simultaneously striving to make all facts involved in this case clear, discover the root cause of the breach, safeguard our customers, and develop stronger and more effective measures for system risk management and prevention of similar events in the future.”
Contents of Order to Improve Business Operations
The FSA’s order is comprised of five main instructions which Coincheck is required to follow if it wishes to remain open. Coincheck is required to open an investigation of the facts and causes surrounding the hack and to provide “proper support” to its clients.
The exchange is, not only required to understand what went wrong and where the responsibility lies, it’s also in charge of making sure no such hack takes place again through the creation of new measures for “system risk management” as well strengthening its current security measures which have obviously proved faulty.
The exchange also took the opportunity to apologize to its clients and community in general. The blog post reads:
“Once again, we would like to offer our sincerest apologies to our customers and everyone else who has been affected by this incident. We will do our utmost to enact meaningful changes to our platform in order to regain the trust of our customers and the community.”
Coincheck to refund users
Despite the severy of this latest crypto-heist, the Coincheck exchange is not throwing the towel and has plans to return the funds to its customers. A previous blog post reads:
“This notice is to announce that a reparations policy towards the approximately 260,000 users affected by the recent illicit transfer of NEM from the cryptocurrency exchange platform Coincheck, run by Coincheck, Inc. (CEO Wada Koichiro), has been decided upon…”
This is an extremely important decision that demonstrates just how serious cryptocurrency exchanges can be, despite of security and technical difficulties. Hacks like the Bitfinex heist and others in which the company was able to return stolen funds to the customers may help certain users trust the cryptocurrency industry as a whole.
Coincheck plans to refund its customers based on the NEM/JPY exchange rates of the Zaif cryptocurrency exchange. An average price will be derived from the prices during the period in which the suspension of NEM trading on Coincheck begun until the 28th of January, the date in which the announcement was posted on Coincheck’s blog.