Crypto Exchanges Unable to Prevent massive Thefts by HackersA number of thefts have raised doubts about the insurability of investor interest while converting their wealth into cryptocurrency. Can regulators protect crypto exchanges?
Biggest thefts in the world’s economic history have occurred in the cryptocurrency industry. Most notably ones have occurred through fraudulent Initial coin offerings; while others have been hacking of cryptocurrency exchanges. Financial agencies across the globe are approaching exchanges to implement effective measures. Safeguarding customer interests is a major goal for the implemented measures.
A number of thefts have raised doubts about the insurability of investor interest while converting their wealth into cryptocurrency.
The agencies have put emphasis on the clarion call on account of a recent cryptocurrency theft. The theft dubbed as Yomiuri Shimbun saw the loss of ¥7 billion worth of virtual currency. More than a half, or ¥4.5 billion was inclusive of customer investments as assets. Tech Bureau Corp Exchange was the victim of the most recent cryptocurrency hacks. The company headquarters are located at Osaka.
Negligence On Part of Crypto Exchanges
Investors blamed the management of tech bureau for failing to safeguard consumer interests. Frequent System failure resulted in a number of directives to correct on the company’s security measures. The theft follows two orders issued by the financial service agency involving improvement business operations
In July 2018, the Financial Services Agency announced changes in its regulatory structure. The changes were meant to facilitate stronger consumer protection. One of the most notable changes included a shift from the Payment Services Act to the financial instrument and exchange act (FIEFA).FIEFA stands out because it calls for companies to manage consumer securities differently from corporate assets.
The FIEFA implementation opened up to Exchange Traded Funds (ETF), which also makes cryptocurrencies to be treated as financial products. The agency believes aligning itself with existing anti-money laundering policies, could open up opportunities for better protection of investor assets. The agency also launched investigations into a pool of unregistered exchanges and was able to derive a number of shortcomings. It is via these shortcomings, that the agency was able to draw a number of voluntary rules to govern exchange operations. The Agency also made it illegal for anonymity based crypto transactions such as Monero and Zcash.
Tech Bureau’s System Failure
Frequent system failures at Tech Bureau resulted in a multi-million dollar theft. Investment experts believe the exchange should be held responsible for the loss. The Japan Financial Agency had insisted on the importance of reinforcing security management measures. The faulty system, therefore, resulted in the hacking of Tech Bureau’s hot wallet. The wallet is connected to the internet for investors to store virtual currency.
The firm’s system was accessed by an outside hacker on 14th September 2018 for three hours. The concern arose after the theft had taken place lies on the grounds that the system was unable to detect any penetration abnormalities. The agency also noted that the company was only able to detect an abnormality a day later after the theft. Financial experts called for the financial agency to tighten registration and supervision guidelines.