Coincheck to Reimburse Over $534 Million in Stolen Funds

The Japanese cryptocurrency exchange, Coincheck, has confirmed that they will reimburse all users who were affected by the recent hack

Coincheck, the Japanese cryptocurrency exchange platform has confirmed that they will refund all clients whose funds were recently stolen by hackers. The amount, which totals to around $534 million, was stolen just two days ago and is to date the biggest cryptocurrency theft.

The exchange platform confirmed that they would reimburse all customers who specifically lost their NEM funds. NEM is currently the world’s tenth largest cryptocurrency based on market capitalization. During the theft, over 260,000 Coincheck users lost their NEM holdings, which in total is 46.3 billion yen.

Last Friday, Coincheck stated that they picked up on “unauthorized access” on the exchange and subsequently blocked all cryptocurrency trading on their platform, except for bitcoin trading.

According to the exchange platform, all its NEM was stored in a hot wallet. Traditionally, exchanges opt to store their funds in a cold wallet, which is the more secure option since it is offline. However, the platform neglected to use the more secure option due to certain technical issues as well as a lack of competent staff members who could manage such a task.

This latest event has succeeded the previous massive cryptocurrency-related loss of MtGox, who lost 58bn yen in 2014.

In 2014, the former Tokyo-headquartered bitcoin exchange platform quickly disintegrated after they admitted to having lost 850,000 worth of bitcoin. At the time it amounted to $480 million.

Despite this massive mishap, cryptocurrency flourished all over the world, but especially in Japan. The country has taken great strides in embracing a crypto-friendly attitude in the last few months and even declared cryptocurrency as legal tender in April 2017.

According to the market analysis tool, jpbitcoin.com, almost one-third of all bitcoin-based transactions were conducted in yen during December 2017.

At the moment, over 1,000 merchants and retailers accept bitcoin as a payment method. In addition, the country’s largest exchange, bitFlyer, celebrated when their client-base surpassed the 1 million barriers in November 2017.

The Japanese public, especially younger age groups, have been somewhat taken with the idea of bitcoin. Especially following the previous economy of very low-interest rate, and practically non-existent return on investments. Bitcoin promised a high-profit rate, something that the Japanese people have been longing for in recent years.

However, this attitude makes Coincheck’s theft incident all the more scandalous. Over the last weekend, several local media outlets accused the exchange platform of operating a sloppy exchange and putting safety second in the wake of their expanding business.

According to Japanese media outlet, the country’s top regulating body, the Financial Services Agency (FSA), is planning to reprimand Coincheck for this latest blunder. The exchange styles itself as the leading cryptocurrency exchange platform in Asia.

In April 2017, Japanese policies required all exchange platforms to complete their registration with the relevant authorities.

While pre-existing exchanges, like Coincheck, was allowed to continue operating until approval, this latest incident is likely to cast a shadow over the likelihood of Coincheck ever being approved to operate in Japan. The company completed their application in September and is so far still pending.

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