Embattled crypto exchange Zaif lays out plan for customer financial support

The embattled Japanese cryptocurrency exchange Zaif has published its plan for customer financial support, in the wake of a hack that cost the firm losses of up to JPY6.7 billion ($59.7 million). The attack resulted in Zaif’s parent company, Tech Bureau Inc., seeking external support to cover stolen customer assets.

With the details published on Wednesday, the firm has effectively announced its business will be transferred to Fisco Digital Asset Group, which is expected to conclude in November. In the documentation, Tech Bureau Inc. noted that the business transfer method was the best solution to the issue, factoring in the need to minimise risks and to protects its customers.

Tech Bureau reported that it had reached a basic agreement involving consideration last Sept. 20 to provide “financial support of JPY5 billion, enter a capital alliance enabling acquisition of a majority of the Company’s shares and allow for a majority of directors and the dispatch of an auditor.”

That deal, however, seeks “to pursue the business transfer method from the viewpoint of avoiding risk for those supporting and due to the requirement to implement a decision rapidly to protect customers.”

Monacoin holders caught up in the attack will be reimbursed in a 60/40 split of crypto to fiat, and at an agreed price of JPY144.548 per coin, or about $1.28. As of Wednesday, all Monacoin transactions on the platform have been halted, with an announcement on resuming trade expected at a later date.

All buying and selling in Bitcoin Cash (BCH), as well as BTC, remains unaffected, and will continue unimpeded. However, deposits and withdrawals have also now been frozen, to be resumed when the transfer of ownership to Fisco is complete.

The plan comes after Japan’s Financial Services Agency (FSA) issued another improvement notice to Zaif—the third notice of its kind demanding the exchange steps up its internal processes. The most recent notice, issued in September, follows on from similar notices from March and July of this year.

The plan shows the devastating impact of the theft on the exchange, and serves as a cautionary tale for other exchanges in the importance of robust security. It remains to be seen whether the deal will be enough to provide the support Zaif’s investors now so desperately need.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Zaif exchange no longer accepting new customers

The parent company of Japanese cryptocurrency exchange Zaif, Tech Bureau, has announced that it is temporarily halting new accounts on the exchange. The decision follows the hack of the exchange last month, which saw it lose around $60 million worth of cryptocurrency. While stressed as only temporary, the new account suspension is certainly one that will set off a few alarms. The suspension only impacts any potential new customers – not those who already have accounts or who have already verified their identification.

Tech Bureau brass said that the company will pull the suspension once it decides on a compensation plan for its customers who lost holding during the hack. The reason is a little puzzling given that the company had allegedly already secured the funding necessary to repay its customers. That funding was announced at the same time the company announced the theft.

In an announcement by the firm, Tech Bureau said, “After concluding the basic agreement, we are advancing consultation and negotiations for concluding a formal contract, there is no change in the policy to ensure thorough compensation for customer assets, and we are continuing to consider the details of specific response…As soon as the content is confirmed, we will report it promptly.”

The exchange is being investigated by the Japanese Financial Services Agency (FSA), which has already issued it a business improvement order. Nonetheless, the FSA wants to take a closer look at the company’s user protection systems. Zaif has received three business improvement orders since it opened – two in this year alone.

Some of the stolen crypto has already been tracked, but getting it back is going to be virtually impossible. The funds were sent to offshore exchanges, the majority of which maintain wallets that do not have to adhere to any anti-money laundering or Know Your Customer regulations. This will make it difficult to determine who owns the wallets.

Two weeks after the hack occurred, Zaif finally realized what had happened. It immediately halted operations and announced the theft. It also said at the time that it had worked out a deal with Japan-based Fisco Digital Asset Group Co. ltd. that would see the latter receive a major share in the company in exchange for about $44.5 million, which Zaif said would be used to reimburse its customers, along with funds it held in reserve.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Zaif hack victims still haven’t been paid

About three weeks ago, the Japanese cryptocurrency exchange Zaif was the target of hacker(s) who made off with around $60 million worth of cryptocurrency. Once the hack was uncovered by the exchange (which, incidentally, took two weeks to discover), the exchange’s parent company, Tech Bureau, suspended trading, apologized to its customers and said that restitution of deposits was forthcoming. Fast-forward to today and – even though it has allegedly already made arrangements to have the funds available – clients are still waiting for their money.

In order to compensate customers for their losses, Tech Bureau announced after the hack that it had made a deal to sell a large chunk of the company to Fisco Digital Asset Group for $44.5 million. That, coupled with its own savings, would give it the money needed to cover investors’ losses. However, it told regulators this week that it needed more time to finalize the repayment plan. It had previously said that it had expected to have the plan in place by the end of last month.

In making its announcement, Tech Bureau added that it is still trying to work out the terms of the Fisco deal. This is surprising since the two were able to quickly come to an understanding following the hack and they’ve now had three weeks to hash out the details.

Japan’s Financial Services Agency (FSA) stepped in to investigate following the hack and subsequently issued Tech Bureau a business improvement order. It was the third received by the company for the Zaif exchange this year and the third since the exchange began operations.

There have been two major hacks of Japanese exchanges this year, the Zaif heist and the Coincheck hack this past January. The scandals have put more pressure on regulators to intervene and crack down on crypto exchange operators to ensure they are protecting their customers adequately. Many are now calling for changes to how the companies manage user funds, with some pushing for the assets to be stored in cold wallets, a type of offline storage facility, instead of in hot wallets that are always connected to the Internet.

According to Kyoto University professor Kaoyuki Iwashita, “Exchange operators should overhaul their security, including hot wallets. We are well past the point of handling massive amounts of funds with the mindset of startups.”

Japan’s self-regulating body for the cryptocurrency industry, the Japan Virtual Currency Exchange Association (JVCEA), apparently agrees with Iwashita. It has introduced a guideline for the involved exchanges that would require them to store no more than 10% of all assets in hot wallets. However, it is only a guideline and cannot be enforced the same way as if it were law.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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JVCEA to tighten crypto storage regulations

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.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Business Improvement Order given to Japan’s Zaif exchange over hack

Almost a week ago, Japan’s Zaif cryptocurrency exchange was the target of a hack that saw it lose $60 million worth of cryptocurrencies. It almost immediately agreed to make restitution to its users, but only after calling on Fisco Digital Asset Group for financial assistance. Now, the country’s Ministry of Finance (MoF), through the country’s Financial Services Agency (FSA), has slapped the exchange’s owner, Tech Bureau, with a business improvement order, a type of admonishment that carries serious penalties.

The MoF announced the order yesterday, explaining that the company will be obligated to find out everything about the hack, as well as to create measures to ensure that another hack won’t be possibly. Tech Bureau is also required to try and determine who was behind the attack.

In addition, the company must respond to customers in order to ascertain the individual level of damage that was done, and will also have to provide routine updates to the MoF on progress made of the hack investigation.

Tech Bureau has now received two business improvement orders in the past three months. The previous order, which was similar to one sent to five other exchanges, demanded better security on the platforms.

The hack saw the exchange lose Bitcoin BCH, Bitcoin Core (BTC) and Monacoin from its hot wallets. While many exchanges have switched to the more secure cold wallet, Zaif had not caught up with the larger exchanges.

Fisco agreed to provide the financial help, but it came with a price. The company will become Tech Bureau’s majority shareholder in exchange for $45 million.

The Zaif hack was the second major hack of a crypto exchange in the country this year. This past January, Coincheck lost $530 million to hackers, reportedly the largest crypto hack in history.

According to the Japanese National Police, crypt theft tripled in the first half of this year. However, enthusiasm has not diminished. There is still a growing number of adopters entering the space and the FSA has indicated that it anticipates over 160 applications from companies looking to start their own cryptocurrency exchanges. They’ll be up against some stiff competition, however, as large companies such as Line, Rakuten and Yahoo are already imbedded in the market.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Africa’s BitPesa, Japan’s SBI Remit team up for cross-border payments

Venture-backed firm BitPesa has partnered with Japan’s remittance service provider SBI Remit to bring cross-border blockchain payments to Africa.

On Monday, CCN reported that the partnership will see the two companies utilizing blockchain technology to make it easier for Africans to buy Japanese products. With the help of blockchain, the companies expect to get rid of challenges accompanying the transfer of funds between African traders and Japanese exporters, resulting in traders enjoying faster cross-border payment transfers with improved efficiency and more stringent security.

The partnership will focus on a number of industries, including used cars, electronics and cosmetics. This is expected to foster strong business ties between Japan and Africa. The partnership will especially benefit the used cars industry—the leading business between the two continents.

According to BitPesa founder and CEO Elizabeth Rossiello, traders stand to gain a lot from this partnership since “they don’t need to do any conversion.” Traders will be able to deposit funds directly to BitPesa’s accounts in their local currencies. Once the funds have been deposited, BitPesa will disperse the funds to their Japanese counterparts at SBI Remit, who will proceed to pay clients.

From this partnership, traders will enjoy easy transfer of funds, lower fees, and they will also not have to deal with currency conversion. Moreover, through the BitPesa and SBI partnership, transactions will be much faster than the two-week duration given to by local banks. It will also reduce the volatility risk that comes with forex conversations.

Enabling cross-border payments will also help open up business between Africa and Japan. The latter will be able to tap directly into BitPesa’s digital exchange platform, which has a presence in Democratic Republic of Congo, Senegal, Uganda, Tanzania, Nigeria, and Kenya. Traders from these countries will now be able to pay for goods from Japan easily.

Asian traders have been finding it hard to launch businesses in Africa due to fund transfer bottlenecks. Transferring funds from local currencies to a G20 currency has not only been time consuming but also expensive. Similarly, even transfer of funds locally within African countries requires the local currency to be converted to a G20 currency to facilitate this transfer.

With the BitPesa platform, Rossiello said the transfers can be done on their platform and would be more affordable and cost effective than conventional approaches. Both companies are optimistic about working together to grow business in Africa and Japan.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Crypto theft cases in Japan ‘tripled’ in 2018 so far

The number of cryptocurrency theft cases in Japan has tripled in the first half of 2018, according to figures released by the country’s National Police Agency (NPA).

The reports come shortly after Japanese crypto exchange Zaif confirmed it has been hacked, with around $60 million stolen in the process, as the latest example of the surge in security breaches to impact the Japanese crypto space.

According to The Asahi Shimbun report, which quoted the NPA figures, the amount stolen this year was substantially larger than the equivalent figure recorded in 2017, with JPY60 billion stolen so far across 158 separate thefts. By contrast, the whole of 2017 saw just JPY600 million lost to thefts over 149 cases, reflected the rapid growth in the volume of criminal activity over the last few months.

In cases where cryptocurrency has been stolen from individual accounts, some 60% of cases involved users with logins similar to those used on other sites. The cryptocurrency most frequently targeted by thieves was XRP, with over JPY1.5 billion stolen across 42 separate incidents.

This was closely followed by BTC, which saw JPY860 million worth of thefts in 94 separate instances. Increasingly the cryptocurrency of choice for scammers, fraudsters and criminals, it is perhaps unsurprising that BTC was represented so prominently in the figures.

After the high profile Coincheck hack back in January, the Japanese Financial Services Agency (FSA) stepped up its efforts to regulate cryptocurrency exchanges in the country. Some analysts have now suggested in light of the Zaif attack that measures could be intensified still further, with the FSA currently reviewing its regulatory approach to tackle this upsurge in criminality.

This is brought into even sharper relief in the present case, with Zaif’s parent company already served with business improvement orders by the FSA in the past. It is likely they will take a dim view on the organisation’s approach to security following the recent theft.

As with the Coincheck theft, Zaif is reported to have held the affected cryptocurrency in hot wallets, with around two-thirds of the total belonging to clients, rather than the exchange itself. This has already resulted in criticism for Zaif and its parent company. The firm has confirmed Zaif is to be acquired by Fisco Ltd., for an amount in the region of JPY5 billion.

With the spike in crypto thefts in the last six months, it’s now over to regulators in Japan to raise security standards throughout the crypto sector.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Japan’s FSA reveals crypto regulation update

Japan is trying to take its cryptocurrency regulation to new heights. The Financial Services Agency (FSA), Japan’s top financial regulator, held its fifth cryptocurrency study group meeting on September 12, 2018, and revealed (in pdf) that, while 160 companies are waiting in line to enter the crypto space, three cryptocurrency operators are currently being reviewed.

At the meeting, the FSA revealed that the Japan Virtual Currency Exchange Association (JVCEA) already has plans for a self-regulatory body for cryptocurrency exchanges. Yasunori Okuyama, the president of the JVCEA, explained that their organization already has a list of self-regulatory rules that they are implementing. Yasunori, who is also the president of Money Partners, explained during the meeting that one of the rules involves notifying the JVCEA when handling a new virtual currency. This is because the association has a right to object to the integration of the new coin.

Also, the organization has other important rules which are focused on managing customer assets. One such rule introduces restrictions for margin trading using cryptocurrency, which was designed to help suppress the risk of loss for users. It also is meant to reduce the excessive speculative transactions that are usually used in leveraged virtual currency trading. Other regulation focuses on anti-money laundering (AML) laws, as well as basic guidelines and ethics for initial coin offerings (ICO) and trading.

The JVCEA currently has 16 members—Money Partners, Quoine, BitFlyer, Bitbank, SBI Virtual Currency, GMO Coin, Bittrade, Btcbox, Bitpoint Japan, DMM Bitcoin, Bitarg Exchange Tokyo, Bitgate, Bitocean, Fisco Virtual Currency, Tech Bureau and Xtheta. The FSA also revealed that out of the 16 companies that sent their applications for review, 12 withdrew their applications, one was rejected and only three survived.

The FSA is also seeking additional workforce, as the long list of applications cannot be covered by its existing staff. It explained that it currently has 30 personnel responsible for monitoring, reviewing and supervising crypto exchanges and traders. The agency’s document revealed that the FSA is making a request for 12 more personnel to be able to respond swiftly to cryptocurrency exchange operators in the 2019 fiscal year. Kiyotaka Sasaki, FSA’s vice-commissioner for policy coordination, said at the meeting, “The biggest problem is how to deal with new operators.”

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

The post Japan’s FSA reveals crypto regulation update appeared first on Coingeek.

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Japan’s FSA reveals crypto regulation update

Japan is trying to take its cryptocurrency regulation to new heights. The Financial Services Agency (FSA), Japan’s top financial regulator, held its fifth cryptocurrency study group meeting on September 12, 2018, and revealed (in pdf) that, while 160 companies are waiting in line to enter the crypto space, three cryptocurrency operators are currently being reviewed.

At the meeting, the FSA revealed that the Japan Virtual Currency Exchange Association (JVCEA) already has plans for a self-regulatory body for cryptocurrency exchanges. Yasunori Okuyama, the president of the JVCEA, explained that their organization already has a list of self-regulatory rules that they are implementing. Yasunori, who is also the president of Money Partners, explained during the meeting that one of the rules involves notifying the JVCEA when handling a new virtual currency. This is because the association has a right to object to the integration of the new coin.

Also, the organization has other important rules which are focused on managing customer assets. One such rule introduces restrictions for margin trading using cryptocurrency, which was designed to help suppress the risk of loss for users. It also is meant to reduce the excessive speculative transactions that are usually used in leveraged virtual currency trading. Other regulation focuses on anti-money laundering (AML) laws, as well as basic guidelines and ethics for initial coin offerings (ICO) and trading.

The JVCEA currently has 16 members—Money Partners, Quoine, BitFlyer, Bitbank, SBI Virtual Currency, GMO Coin, Bittrade, Btcbox, Bitpoint Japan, DMM Bitcoin, Bitarg Exchange Tokyo, Bitgate, Bitocean, Fisco Virtual Currency, Tech Bureau and Xtheta. The FSA also revealed that out of the 16 companies that sent their applications for review, 12 withdrew their applications, one was rejected and only three survived.

The FSA is also seeking additional workforce, as the long list of applications cannot be covered by its existing staff. It explained that it currently has 30 personnel responsible for monitoring, reviewing and supervising crypto exchanges and traders. The agency’s document revealed that the FSA is making a request for 12 more personnel to be able to respond swiftly to cryptocurrency exchange operators in the 2019 fiscal year. Kiyotaka Sasaki, FSA’s vice-commissioner for policy coordination, said at the meeting, “The biggest problem is how to deal with new operators.”

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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Japan’s Zaif crypto exchange loses $60M in hack

Zaif, a cryptocurrency exchange based in Japan, has fallen victim to a hack, resulting in the loss of JPY6.7 billion ($60 million) worth of cryptocurrencies.

The exchange, which is owned and operated by Tech Bureau, started investigating after it noticed unusual withdrawal and deposit transactions on the platform last Sept. 14. Three days later, while trying to fix the problem, Zaif discovered that unknown persons had hacked their platform and stole 5,966 BTC, along with an unknown number of Bitcoin Cash and MonaCoin from their hot wallets.

Currently, Zaif has shut down its platform in order to fix the breach. They also hired a team of engineers to work on the issue and hope to resume operations soon. However, it is not clear when the platform will open its platform for transactions. The exchange has reported the matter to the Financial Services Agency (FSA) in Japan. Zaif has also filed a criminal case with the local authorities.

The exchange has issued an official announcement apologizing to its customers for the inconvenience as they work to solve the issue. According to Zaif, the company doesn’t have enough reserves to refund customers for the stolen cryptocurrencies.

“Our company’s unique assets are approximately 2.2 billion yen, and the virtual currency equivalent to customer’s assets is about 4.5 billion yen,” according to the roughly translated Zaif statement. “After discovering this case, we are striving to secure financial resources not to damage the customers’ assets.”

Currently, Zaif said it has asked Fisco Digital Asset Group Co. Ltd. for financial assistance. The JASDAQ-listed company has agreed to invest JPY5 billion ($44.5 million) in exchange for a major share of ownership in the crypto exchange.

Early this year, FSA had issued a warning to Zaif along with six other cryptocurrency exchanges in Japan asking them to beef up security on their platforms. Since the hack on Coincheck, FSA has been keen on making sure all cryptocurrency exchanges in the country have implemented stringent security meaures on their platforms.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.

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