Financial regulators in Japan are shining their spotlight on the security protocols operated by cryptocurrency exchanges to safeguard their cold wallets. This move comes as the threat of internal thefts continues to be of concern to many stakeholders in the industry.
Greater Security for Cold Wallets
According to Reuters, anonymous sources close to Japan’s Financial Services Agency (FSA) are asking cryptocurrency exchange platforms in the country to beef up security measures for their cold wallet storage.
The FSA says that some exchanges are presently being negligent of the rising threat of inside jobs related to recent cryptocurrency exchange hacks. One of the sources quoted by Reuters said the Agency had received reports of exchanges who fail to rotate staff members entrusted with their cold wallet storage.
Having already set up regulations to restrict the use of hot wallets by exchanges, the FSA is now looking towards the next viable point of attack for “bad actors’ looking to steal cryptocurrencies.
Back at the start of 2018, hackers stole about $530 million in NEM (XEM) cryptocurrency from Tokyo-based Coincheck. This hack caused the FSA to adopt even stricter regulations for the country’s cryptocurrency exchange platforms.
Crypto Exchange Hacks: The Rising Threat of Inside Jobs
In its 2018 anti-money laundering report published at the start of 2019, blockchain intelligence firm, CipherTrace, highlighted the rising threat of internally orchestrated cryptocurrency hacks.
With platforms beefing up their security, it seems like a reasonable leap for attacks to originate from within. The recent Bithumb hack appears to have been the work of people familiar with the company, a fact alluded by the platform in its initial announcement of the hack.
Japan while being generally regarded as a cryptocurrency-friendly country has arguably some of the strictest regulations of any jurisdiction. The FSA was the first regulatory body back in 2017 to create and enforce laws for cryptocurrency exchange platforms at a national level.
The emergence of these strict regulations did have some negative effects as some platforms moved their operations from the country to Malta. Many cryptocurrency exchanges had initially chosen to settle in Japan after China banned initial coin offerings (ICOs) and crypto trading in September 2017.