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Coincheck Wins Crypto Exchange License 12 Months After Major Hack

Japanese crypto exchange Coincheck, which suffered a $530 million hack in January of last year, is now a licensed entity.

Monex Group, the Japan-based online brokerage firm that acquired Coincheck for $33.5 million following the cyberattack, announced Friday that the exchange is now registered with the Kanto Financial Bureau, under the country’s Payment Service Act, effective immediately.

The license was approved by the country’s Financial Services Agency (FSA), on the basis of Coincheck’s improved risk management and governance systems with “concrete internal controls and customer protection in mind,” Monex said.

Following the massive hack of around 500 million NEM tokens in January 2018, the FSA had ordered Coincheck to strengthen its security systems and submit a business management improvement plan to the authority. At the time, the exchange was not registered with the regulator.

The breach also forced Coincheck to suspend its services for some months. Since then, the exchange has been phasing back in its operations. By November 2018, it had reinstated services for all listed cryptos on its platform.

Now with the license in place, Coincheck joins the growing list of regulated crypto exchanges in the country, including financial services giant SBI Holdings, which operates a registered platform called VCTRADE. U.S.-based exchange unicorn Coinbase has previously said it expects to become licensed in Japan in 2019.

All crypto exchanges in Japan came under anti-money laundering (AML) and know-your-customer (KYC) rules in April of 2017 when the country’s legislature passed the Payment Service Act and recognized bitcoin as a legal method of payment.

Over 160 firms are planning to apply for the crypto exchange license, the FSA said back in September, adding that it is looking to increase its staffing levels to speed up the review process.

Tokyo image via Shutterstock

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China’s Internet Censor to Start Regulating Blockchain Firms Next Month

China’s internet censorship agency has approved a set of regulations for blockchain service providers in the country that will take effect in mid-February.

The Cyberspace Administration of China (CAC) published its new “Regulation for Managing Blockchain Information Services” on Thursday, defining blockchain information service providers as “entities or nodes” that offer information services to the public using blockchain technology via desktop sites or mobile apps. The rules become official on February 15, according to the release.

Among the 23 articles listed in the document, one requires blockchain service providers to register with the CAC within 10 working days of starting to offer services to the public.

The agency also mandates that blockchain startups must register their names, service types, industry fields and server addresses. Further, it bans startups from using blockchain technology to “produce, duplicate, publish, and disseminate” information or content that is prohibited by Chinese laws.

If blockchain startups fail to comply with the rules, the CAC said it would first issue a warning, while failure to act within the specified timeline would bring a fine ranging from 5,000 yuan ($737) to 30,000 yuan ($4,422), depending upon the offense.

The CAC first published draft rules in October of last year. At that time, one of the articles also recommended that blockchain startups operating in fields such as news reporting, publishing, education and the pharmaceutical industry must also obtain licenses from relevant authorities prior to registration with the CAC. The final rules have dropped this article altogether.

Previously, blockchain technology has been utilized to bypass China’s strict internet censorship – often dubbed “The Great Firewall.” For example, as part of the #Metoo movement and a recent pharmaceutical scandal in the country, individuals posted information on the ethereum blockchain to avoid censorship.

China flags image via Shutterstock 

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Two Thirds of Korean Crypto Exchanges Fail Government Security Check

Only a third of cryptocurrency exchanges inspected got a full pass in a recent government security audit.

The Ministry of Science and ICT, the Korea Internet & Security Agency and the Ministry of Economy and Finance inspected a total of 21 crypto exchanges from September to December 2018, examining 85 different security aspects.

Notably, only 7 of them – Upbit, Bithumb, Gopax, Korbit, Coinone, Hanbitco, and Huobi Korea – cleared all the tests, CoinDesk Korea reported Thursday.

The remaining 14 exchanges are “vulnerable to hacking attacks at all times because of poor security,” the Ministry of Economy and Finance said, though it didn’t name the platforms. The agencies put down the security failures to “insufficient establishment and management of security system such as basic PC and network security.”

The exchanges were inspected in a review that looked different aspects of administrative, network, system and operational security, as well as database backup and wallet management.

South Korea has lost many millions of dollars in cryptocurrencies through hacks at exchanges such as Coinrail (over $40 million) and Bithumb (over $30 million).

Back in February, the country’s officials said that they believed North Korean hackers were behind the attacks. Indeed, North Korea’s infamous hacking group, Lazarus, has been reported to be behind the theft of $571 million in cryptocurrencies since January 2017, according to a report from cybersecurity vendor Group-IB.

In the wake of the security breaches, South Korea’s Financial Services Commission, in July of last year called on politicians to pass a bill regulating domestic cryptocurrency exchanges with urgency in order to counter lax security in the industry.

Test fail image via Shutterstock 

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Japan Eyes Regulation of Unregistered Crypto Investment Schemes

Japan’s financial regulator is reportedly looking to close a legal loophole that lets unregistered investment firms solicit funds in cryptocurrencies rather than cash.

According to a report from Sankei Shimbun on Tuesday, Japan’s Financial Service Agency (FSA) is planning revisions to bring such schemes under the country’s Financial Instruments and Exchange Act, although no timeline for the changes was provided.

Currently, the act prohibits unregistered schemes from collecting investments in fiat currencies, but it does not mention cryptocurrencies.

The issue has reportedly received increased focus from the watchdog in the wake of rising incidences of crypto pyramid schemes in the country. Back in November, police in Tokyo arrested eight men alleged to have run such a scheme that collected 7.8 billion yen (almost $69 million) in cryptos from thousands of victims.

The eight were said to have collected most of the payments in bitcoin, as well as another 500 million yen (about $4.40 million) in cash, under the guise of a bogus investment firm called Sener.

Sankei Shimbun cited officials as saying that, if the scam had solicited only cryptocurrency, it’s possible the criminals would not have been caught.

Japan’s FSA has been actively regulating the cryptocurrency space since the shockwave that followed the collapse of the Mt Gox exchange in 2014. Measures have included instigating a licensing scheme for crypto exchanges and scrutinizing exchanges over security and compliance with anti-money laundering rules.

Just yesterday, the agency was reported to be considering approving crypto exchange-traded funds (ETFs). At the same time, it has now apparently dropped plans to approve trading of crypto derivatives on financial exchanges due to concerns the products would encourage speculation.

Bitcoins on keyboard image via Shutterstock 

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Japan’s Financial Regulator May Approve Crypto ETFs: Report

Japan’s Financial Services Agency (FSA) is apparently open to approving crypto exchange-traded funds (ETFs).

A Bloomberg report on Monday, citing a person “familiar with the matter,” said that the FSA is currently ascertaining institutional interest in ETFs that track cryptocurrencies and could ultimately give them the go ahead.

Japan’s ruling Liberal Democratic Party will reportedly submit draft legislation by March 2019, that could include such a move through amendments to existing financial rules. The bill, which would also bring in more self-regulatory oversight of the industry and class many ICO tokens as securities, could come into law by 2020, the report indicated.

However, Bloomberg added that the FSA has now dropped plans to include approval for trading crypto derivatives on financial exchanges due to concerns the products would mainly lead to speculation.

The increased scrutiny of the crypto space in Japan follows a major hack of the Coincheck exchange in January that saw around $533 million in cryptocurrencies stolen.

Crypto ETFs are seen by many market observers as a means to bring institutional capital into the sector, though not all are keen on the idea.

In the U.S., several participants are planning to launch such products, although the Securities and Exchange Commission (SEC) has not yet approved any. Back in August, the the agency rejected nine bitcoin ETF applications “to prevent fraudulent and manipulative acts and practices,” and in December postponed a decision on a product from VanEck/SolidX until February.

Further, SEC chairman Jay Clayton said at CoinDesk Consensus in November that he doesn’t see a pathway to a cryptocurrency ETF approval until concerns over market manipulation are addressed.

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