Despite taking several regulatory measures this year, Japan’s cryptocurrency market still remains vulnerable to hacks. A licensed cryptocurrency exchange Zaif was reportedly hacked on Thursday, September 20, losing worth $60 million worth of Bitcoins. The Zaif exchange is operated by Tech Bereau Inc.
A local report from Japan stated that on September 14 at 17:00 hours, the exchange first witnessed an unusual outflow of funds. Soon after coming to notice, the exchange immediately suspended its deposit and withdrawal services.
— Zaif – 暗号通貨取引所 (@zaifdotjp) September 19, 2018
Tech Bureau has confirmed that in further investigation, it found that the hackers managed to get an unauthorized access to the exchange’s hot wallet. A 460 million casualty has been reported in total as the exchange lost different amounts of Bitcoins, Bitcoin Cash, and MonaCoin.
A hot wallet is basically the one which is online and remains connected to the internet all the time. Such wallets are majorly used by exchanges for the immediate transaction of funds. However, hot wallets are more susceptible to online attacks and offer less security in comparison to its counterpart called the cold wallets. Cold wallets are basically offline hardware devices which that require several authentications to get access to the funds.
Tech Bureau Inc. has further admitted that currently, its own asset reserves stand at 2.2 billion yen (approximately $20 million). Additionally, it has also reached an agreement with a Japanese listed-firm called Fisco Digital Asset Group who will be providing financial assistance of 5 billion yen ($44.5 million).
Tech Bureau said that it has completed all the necessary formalities and filed the theft as a criminal case with the local authorities. The authorities will now proceed with a further investigation in this matter.
Second Crypto Exchange Hack After Coincheck
This is the second major incident of hacking reported in Japan this year. As was previously reported by Coinspeaker, in January 2018, the cryptocurrency exchange Coincheck lost a whopping $500 million in NEM tokens. Japan’s top regulatory authority – The Financial Services Agency (FSA) quickly swung into action post the hack.
The FSA later introduced several strict regulatory measures to be implemented in the cryptocurrency landscape of the country. It was made mandatory for exchanges to obtain the regulator’s license in order to continue their operations in Japan. The regulatory agency also took measure to plug the loopholes in the system in order to create a conducive and safe environment for its investors.
In April 2018, Japan’s biggest online brokerage firm – Monex Group acquired Coincheck in a $34 million deal. In spite of several measures, it looks like cryptocurrency exchanges are still vulnerable to attack.
One shortcoming of the crypto industry is that in spite of digital assets transactions taking place on a completely decentralized platform, the exchange operations are still centralized. Moreover, some handful of decentralized exchanges available in the market are still not robust enough to handle millions of users at a time.
Some sort of concrete development needs to happen in this direction which can provide absolute protection to the investors’ funds.