Following the recent hack of Japanese exchange service Coincheck, $534 million worth of cryptocurrency was stolen from the company’s “hot wallet”. With the investigation revealing that hackers remained undetected for an estimated eight hours on Jan. 25, the Japanese Financial Services Agency (FSA) warned the exchange service to set up improvements that prevent or limit such incidents.
Although Japan has asked all cryptocurrency operators to register with the government in an attempt to regulate the cryptocurrency industry, Coincheck was allowed to continue operations. Because it had applied for license as an exchange, though, Coincheck does fall under the supervision of the FSA.
The company said it’s currently tracking the missing funds and may be able to recover them. However, there is no guarantee that the process will be successful.
“We know where the funds were sent,” said Co-founder Yusuke Otsuka in a press conference. “We are tracing them and if we’re able to continue tracking, it may be possible to recover them. But it is something we are investigating at the moment.”
While the equivalent of 58 billion yen of NEM tokens were stolen, Coincheck did say they will cover 90 percent of losses using internal funds.
“What’s the lasting impact? It’s hard to tell,” said Marc Ostwald, global strategist at ADM Investor Services International in London. “Japan is one of the most pro-crypto trading countries, among the G-20. In Japan they don’t really want a wholesale clampdown. So it will be interesting how Japanese regulators respond to this, if they indeed do.”
Coincheck is not the first cryptocurrency exchange to fall victim to a cryptocurrency heist; in 2014 Mt. Gox lost between $400 and $480 million. Japanese regulators have since started to try to regulate cryptocurrency exchanges to prevent similar losses.