Coincheck Aftermath: Japan’s Regulator to Inspect Crypto Exchanges Security

Japan’s Financial Services Agency (FSA) will begin conducting thorough on-site checks of cryptocurrency exchanges in the country. The decision comes on the heels of the exchange’s hacking, in which $534 million of the cryptocurrency NEM were stolen. The inspections are aimed at assessing each exchange’s security measures, thereby assuring a certain level of investor protection that is satisfactory in the eyes of the regulator.

The crackdowns endured in the region, are primarily led by South Korea and have recently intensified in China, creating an even bigger market share for Japan’s industry leaders. DMM Group launched its own crypto exchange in January, and has been conducting heavy advertising campaigns to gain greater traction.

Bitflyer and Coincheck alone, were responsible for running over 800 ads across various media channels during a two-month span from December through January.

Ads vs. Security – Allocation of Funds

As Coincheck has spearheaded a multi-faceted marketing strategy, the company has recently made headlines for the wrong reasons. As reported by Finance Magnates, Coincheck endured a high caliber hacking last week, when the exchange was the victim of a hacker theft of the cryptocurrency NEM. The total amount stolen from traders on the exchange was equivalent to roughly $500 million, based on the virtual currency’s value at the time of $0.94.

Some of the complaints toward a need for regulations involve the necessity to protect client funds and tokens. For comparison, funds held at a bank are generally federally insured by local governments, protecting individuals from potential unlawful behavior.

In this case, Coincheck has stated that it will compensate the theft victims an amount of $0.81 per dollar stolen. While some of the losses is till incurred by the traders themselves, it is a step forward from similar incidents in the past, in which clients were not compensated in any capacity.

However, the cryptocurrency industry remains relatively unregulated, and the current consequences of such cyber attacks fall on the investors, despite having no responsibility in the matter. CEO of SBI Holdings, Yoshitaka Kitao responded to the hack, saying: “The thing that makes me the most angry is that they spent money on commercials that should have been spent on their systems.”

Facebook Bans Crypto Ads

As governments analyze and prepare to manifest regulations for the industry, some companies have stepped up to assure the prevention of aggressive advertising through their channels. Last week, Facebook banned all crypto-related advertising on its networks until further notice.

The ban is inclusive of the Instagram and Audience Network networks as well, as the company combats the growing craze surrounding the high-risk investments. Facebook addressed its decision in a statement: “This policy is intentionally broad while we work to better detect deceptive and misleading advertising practices, and enforcement will begin to ramp up across our platforms including Facebook, Audience Network, and Instagram.”