Crypto Exchanges of Japan To Be Limited In Hot Storage
The Japan Virtual Currency Exchanges Association (JVCEA) will tighten the rules of crypto trading. Several major licensed platforms of the country are to restrain the amount of funds that every exchange, an organization member, can operate daily, The Japan Times reports referring to anonymous sources.
The limit is expected to be 10−20% of users' deposits. The Association is reviewing the rules and is preparing to soon present the innovations for the regulator, the Japan Financial Services Agency, to confirm.
While crypto platforms keep most of their clients' funds offline, using the option of "cold" storage, some amount is placed in "hot" wallets. For the latter, permanent Internet connection is required which makes this kind of storage vulnerable to hackers. In the updated rules, JVCEA will restrict the turnover of funds on "hot" storage.
The need for new security measures arose after a Japanese trading platform Zaif was hacked. Scammers broke into "hot" wallets and stole about $60 million in bitcoins, Bitcoin Cash and MonaCoin. The exchange was forced to apply to a lender in order to recover users’ damages.
Regulators have launched an investigation of the cyber attack on the platform, and are planning to tighten the rules for operation of the local crypto exchanges.
Earlier, the platform Coincheck was subject to hacking with the hackers stealing $523 million in NEM cryptocurrency. It is reported that these crypto assets were kept in “hot” wallets, too.
The Japan Virtual Currency Exchanges Association is a self-regulating union of trading platforms, formed in April 2018. It consists of several large licensed exchanges.