Zaif, a major crypto exchange in Japan, was hacked this week, losing nearly $60 million in user funds in a high profile security breach.
Local publications including Japan Times reported that 6.7 billion yen was stolen by an unknown group of hackers, 2.2 billion yen in corporate funds and 4.5 billion yen in user funds were lost during the breach.
Tech Bureau, the company behind Zaif, told its customers that all of the investors affected by the hacking attack will be reimbursed in cryptocurrencies. Due to the scale of the attack, Zaif reached a deal with Tokyo-based financial markets research firm Fisco, which has given the company 5 billion yen in return for majority stake in the exchange.
“The firm originally said about ¥6.7 billion was hacked, but the actual amount has yet to be confirmed as the server that was attacked has not been rebooted for security reasons,” Japan Times reported.
What Impact Will it Have on Japan?
In April of last year, the Japanese Financial Services Agency (FSA) implemented strict policies to oversee cryptocurrency exchanges. As a part of a larger initiative, FSA created a national licensing program, requiring crypto trading platforms to file a license to operate within the country.
Recently, the FSA stated that it has decided to expand its crypto team handle a large amount of applications which are expected to be filed by the end of 2018. 160 companies are currently planning to file licenses to operate as regulated digital asset exchanges in the country.
Subsequent to the $500 million security breach of Coincheck, which was triggered due to poor security systems of the exchange, the government of Japan strengthened regulations overseeing digital asset trading platforms. The breach of Zaif is expected to lead the government to implement stricter policies regarding security and internal management systems.
As CCN previously reported, poor security systems employed by cryptocurrency exchanges like Bithumb and Coinrail led the government to legitimize and regulate the cryptocurrency exchange market.
While the government of South Korea refrained from recognizing crypto and blockchain as a legitimate sector, the occurences of high profile hacking attacks left investors requiring investor protection, which the government of South Korea could no longer refuse.
The $60 million hacking attack of Zaif will lead the Japanese government to cooperate more actively with exchanges, leading government agencies to be involved in the security and internal management systems of exchanges to ensure that investor funds remain safe.
In South Korea, the government is considering the imposition of a policy that will require exchanges by law to obtain insurance so that exchanges do not need external capital, similar to the case of Zaif, to cover investor funds.
How Will Japan FSA Respond?
The FSA has stated prior to the Zaif hack that it will add a dozen officials onto the crypto department of the agency. With 160 firms on the waiting list to file applications with the FSA, the agency will most likely revise requirements for companies pertaining to security.