The Aftermath of Coincheck’s Hack.
Japanese investors are undeterred by the recent Coincheck hack and the general public is now more interested in cryptocurrencies due to the constant hype in the media. Bitflyer, Japan’s largest crypto exchange by volume, is seeing a rapid increase in the number of registered users. “Ironically, many people got interested in cryptocurrencies after this incident,” said an executive of the exchange.
It has been a week since a major Japanese cryptocurrency exchange, Coincheck, was hacked for 58 billion yen (~USD$530 million) worth of NEM. While the exchange has promised to repay its 260,000 affected customers out of its own capital, no timeframe has been set and a class action lawsuit is being prepared by 5 lawyers.
Earlier this week, the Japanese Financial Services Agency (JFSA) issued a business improvement order to Coincheck and launched an investigation into all other crypto exchanges in the country for security gaps. On Friday, the agency conducted an on-site investigation of Coincheck. The Tokyo Police has also launched an investigation into the hack.
Haruhiko Kuroda, Governor of the Bank of Japan, on Thursday urged cryptocurrency exchange operators “to enhance security,” Japan Times reported and quoted him saying:
“Providers of cryptocurrency services need to explain the risks to investors proactively and take sufficient security steps.”
Since April of last year, companies seeking to operate crypto exchanges in Japan must register with the JFSA. So far, licenses have been granted to 16 companies, including all of the major exchanges in the country except Coincheck, whose application has been under review by the agency for about 5 months.
Noting that Coincheck does not have a license, Bitflyer CFO Midori Kanemitsu said “now people understand that they need to use safe exchanges, which are registered with JFSA and have a high standard of security.” Bitflyer, Japan’s largest exchange by volume, was among the first 11 crypto exchanges to be licensed by the agency in September of last year.
Kanemitsu continued to share, “I don’t think there is a huge change after the hack news, however people now recognize the risk,” noting:
“Ironically, many people got interested in cryptocurrencies after this incident as this has been reported so often and broadly in Japan, the number of new users at Bitflyer is increasing very rapidly after the news. This time people understand that this is due to the exchange and not due to cryptocurrency itself.”
Coincheck has previously claimed the largest market share of merchants accepting bitcoin in Japan. In January of last year, the company said that more than 5,000 merchants had signed up to accept the digital currency through its merchant service called Coincheck Payment.
The company partnered with Recruit Lifestyle Co. Ltd and announced in April of last year that 260,000 merchants using Recruit Lifestyle’s point-of-sale (POS) system, called Airregi, would start accepting bitcoin within months. However, by the end of last year, only some merchants reported having activated the bitcoin payment option.
Coincheck suspended its merchant service on January 27 at 17:00 Japan time in response to the NEM hack.
Following Coincheck’s merchant service suspension, Airregi “stopped the bitcoin payment function voluntarily” and notified the merchants using its POS system of this decision, Business Insider Japan confirmed. Entertainment giant DMM.com, which also used Coincheck to accept bitcoin, told the news outlet that “The bitcoin payment acceptance by our company has also been suspended due to the suspension of Coincheck Payment.”
However, Kanemitsu said:
“We don’t see any discouragement as of now due to Coincheck’s news. Some merchants using Coincheck wallet stopped accepting cryptocurrency payments. But they would like to continue crypto payment, so some of them are coming to us.“
Bitflyer has also been helping merchants accept bitcoin, including Bic Camera and Yamada Denki, two of Japan’s largest consumer electronics chains.
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