Coincheck Must Report on Security Failures, Says Finance Watchdog

Following last week's huge hack, Japan's Financial Services Agency has said Coincheck must report on the issues and its plan for improvements.

AccessTimeIconJan 29, 2018 at 11:00 a.m. UTC
Updated Sep 13, 2021 at 7:29 a.m. UTC
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Following the recent major hack of Japanese cryptocurrency exchange Coincheck, the country's financial watchdog is taking measures to ensure and improve the industry's security.

The intrusion, which was revealed Friday after the exchange had abruptly ceased most services, saw the theft of about 500 million XEM – the token of the NEM network – worth roughly $420 million at the time.

According to the latest update from Coincheck, Japan's Financial Services Agency (FSA) has ordered the exchange to launch an investigation into its security vulnerabilities that led to the hack, and to submit a report for management improvement to the authority by Feb. 13. The FSA said the firm is also required to report details regarding the facts and causes of the issue.

According to a report from Nikkei today, the authority announced the order during a press conference, saying, "Inappropriate management of system risks had become the norm at Coincheck." That sloppiness led to a loss even larger than that stolen in the notable Mt. Gox hack.

Nikkei also indicated that the agency is expanding its investigations, including on-site inspections at other cryptocurrency exchanges in the country to prevent a reoccurrence of the issue.

In an earlier statement issued to CoinDesk, the NEM.io Foundation also suggested a lack of security precautions at Coincheck may have resulted in 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." said Lon Wong, president of the foundation.

Over the weekend, Coincheck also issued a statement stating that the exchange will compensate the exchange's 260,000 NEM holders who lost funds, although no detailed plan for repayment has yet been released.

Japan flag image via CoinDesk archive

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