February 9, 2018 – Japan’s financial regulator has begun on-site inspections of multiple digital currency exchanges to check their risk management systems, following a massive theft of digital money worth ¥58 billion ($533 million) from Coincheck Inc., a minister said earlier today.
The probes come after all exchange operators in Japan, both registered and those awaiting approval, were due to report to the Financial Services Agency by Feb. 2 on how they manage risks to protect customer assets.
“We have started on-site inspections on multiple operators to examine their internal management systems, including system risk management,” Financial Services Minister Taro Aso told reporters after a Cabinet meeting.
Aso said the agency decided to inspect the operators after looking into their reports.
While Aso declined to reveal the names of the currency exchanges that were inspected recently, a source with knowledge of the matter said they are GMO Coin Inc. in Tokyo and Tech Bureau Corp. in Osaka.
To strengthen oversight, the FSA is expected to expand inspections to all cryptocurrency exchanges in the country over the next few months, according to a source familiar with the plan.
In Japan, there are 16 registered exchanges and another 16 exchanges awaiting approval, the latter including Coincheck, according to the FSA. Exchange operators are required to register under the revised funds settlement law which took effect last April.
The heist has prompted debate about whether and how to regulate such digital currencies, which have gained popularity globally.
The FSA has dispatched inspectors to Tokyo-based Coincheck to see if they have proper risk management systems in place and the financial strength to reimburse holders, as promised, of the NEM currency to the tune of ¥46 billion.
The Japanese financial watchdog has issued a business improvement order to Coincheck, which has until Feb. 13 to report back with steps to prevent a recurrence.