Japan’s FSA defends approach after Coincheck fraud
The Coincheck cryptocurrency fraud has rocked Japan, which had been the first country in the world to build a regulatory environment for crypto exchanges. The FSA regulator briefs Euromoney on how it built its rules and what Coincheck means for the future.
Journalists wait outside cryptocurrency exchange Coincheck's office in Tokyo
Pity Japan. The country has sought to build the most sophisticated and inclusive regulatory environment in the world for cryptocurrency exchanges, one that marries supervision with a need to foster innovation.
Yet it has now been home to the two biggest heists in cryptocurrency history. Bad luck? Or has one state of affairs led to the other?
The theft of at least $500 million-equivalent of cryptocurrency from Tokyo-based exchange Coincheck in January has the Financial Services Agency (FSA) reeling. It is simultaneously trying to work out what happened, stop it from happening again and decide whether its regulatory approach is flawed.
The FSA has not spoken publicly about the heist, but two sources at the regulator briefed Euromoney at length at its Kasumigaseki headquarters in February, on condition of anonymity.
To understand the Coincheck situation one must first go back to the earlier theft, from another Shibuya-based exchange, Mt Gox. That involved a similar volume of cryptocurrency ($450 million, based on the value at the time) when 850,000 bitcoins were stolen in early 2014, 650,000 of which remain unaccounted for today.