Japan’s financial regulator is pushing to improve internal security in the country’s cryptocurrency exchanges.
On Tuesday, in a development that marks Japan’s intent to increase its oversight of cryptocurrencies, Japan’s financial regulator stated, cryptocurrency exchanges will now require to strengthen internal oversight of “cold wallets” used to store digital money, said a source with direct knowledge of the matter at hand.
The move by Japan’s Financial Services Agency (FSA) underscores the difficulties in ensuring security of virtual currencies and comes at a time when Tokyo aims to leverage the fintech industry to stimulate economic growth.
Following a series serious security lapses at cryptocurrency exchanges in 2018, the FSA had come down strongly on less-secure “hot wallets” – where virtual currencies are stored on platforms directly connected to the internet – prompting cryptocurrency to shift to “cold wallets” – storage devices that are not connected to the internet and therefore more secure.
Nonetheless, the FSA has determined that despite been not connected to the net, cold wallets face the risks of internal theft, said a source. Some cryptocurrency don’t even have rules that ensure that the person in charge of the storage is regularly rotated, said the source on the condition of anonymity.
Sources preferred the cover of anonymity since the information has yet to be made public.
Japan has 19 registered cryptocurrency exchanges, although some are yet to be operational.
As per the source, the FSA will order the exchanges it deems to be less secure to ramp up their security levels.
The FSA did not respond to a request for comment.
In 2017, Japan became the first country in the world to regulate cryptocurrency exchanges at a national level.
In 2018, hackers had stolen cryptocurrencies worth $530 million from a Tokyo-based exchange.