While Japan’s Financial Services Agency (FSA) has already announced that it is preparing to tighten regulations on the cryptocurrency industry, the self-regulatory crypto body, the Japan Virtual Currency Exchange Association (JVCEA), is introducing some of its own measures, as well. The Japan Times news outlet indicates that the JVCEA will establish a ceiling for the amount of digital currencies allowed to be managed online by any of the country’s crypto exchanges.
Japan Times quotes sources close to the JVCEA who haves said that the group is considering putting a cap of between 10-20% on all customer deposits that can be managed online. The JVCEA is now revising its rules, which were first drafted this past July, and will subsequently present them to the FSA.
Typically, crypto exchanges store their users’ crypto assets in cold storage wallets, which aren’t connected to the Internet. A certain percentage is kept in a hot wallet, or an Internet-connected storage facility, which are tempting targets for hackers. The new rules will prevent hackers from gaining access to the majority of the assets managed by the exchanges.
Two Japanese exchanges have been hacked this year, resulting in major losses. The first was in January when Coincheck was attacked and hackers made off with around $523 million in NEM coins. The assets had allegedly been stored in hot wallets that had relatively low security. The FSA was compelled, following the hack, to intervene into the crypto space and began cracking down on the operations. It has since issued a number of business improvement orders, a type of administrative slap on the wrist that can carry financial penalties, and has pulled the plug on several companies.
The second high-profile hack occurred more recently. The Zaif exchange was hacked about two weeks ago, resulting in just under $60 million in Bitcoin, Bitcoin BCH and MonaCoin being taken. The hack was an embarrassment for the exchange, as it didn’t realize that the hack had taken place for about two days following the breach. Afterwards, Zaif announced that it would reimburse all of its clients, but only after its parent company, Tech Bureau, agreed to relinquish significant control of the company to Fisco Digital Asset Group.