Japanese authorities issue business improvement order to virtual currency exchange operator Tech Bureau

Maria Nikolova

The order follows a JPY 6.7 billion heist of Zaif, a cryptocurrency exchange operated by Tech Bureau.

The Japanese authorities continue to grapple with a growing volume of problems related to the activities of virtual currency exchanges. Earlier today, the Ministry of Finance issued a business improvement order to Tech Bureau Inc, operator of cryptocurrency exchange Zaif.

Las week, Tech Bureau confirmed that about JPY 6.7 billion in virtual currency had been stolen. The virtual currency is reported to have been stolen from “hot wallets” that lack solid security. The hack, which happened between 5 p.m. and 7 p.m. on September 14, 2018, affected three types of cryptocurrency – Bitcoin, Bitcoin Cash and Monacoin.

In its announcement today, the Ministry of Finance said it will impose administrative penalties on Tech Bureau. In particular, the company will have to determine the root cause of the leak case and to clarify who is responsible for the security failures. The virtual currency exchange operator will also have to formulate and implement measures to prevent the recurrence of such accidents.

The company will also have to respond adequately to affected customers.

The Zaif heist cast a further shadow over the soundness and reputation of virtual currency exchanges in Japan. In January this year, Coincheck suffered a hacking incident which led to JPY 58 billion having been stolen. The Japanese regulators ordered the company to determine the facts and causes of this case and to issue proper response to customers. In addition, Coincheck was ordered to strengthen the management control of its risk management system and to clarify who bears the responsibility for the theft. The company was also instructed to to formulate measures to prevent recurrence of the incident.

Coincheck was eventually acquired by online trading expert Monex Group, Inc. (TYO:8698). On April 6, 2018, the broker confirmed earlier media reports that it would buy the Exchange. The deal, which covers 1,775,267 shares in Coincheck, is valued at JPY 3.6 billion.

Monex said it would aim to build a secure business environment for customers by fully backing up Coincheck’s enhancement process. In particular, Monex stated its intentions to maximize the use of its expertise and human resources of business administration, system risk management, and customer asset protection system.

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