Coincheck admits to reimburse 260,000 customers after failing to secure them from hackers.
Another major security breach in the cryptocurrency market. Japan-based cryptocurrency exchange has fallen victim to one of the world's biggest heists.
Coincheck is one of the popular and well-known bitcoin wallet headquartered in Tokyo, Japan. Apart from wallet services, it also act as an exchange for the digital currency investors. Coincheck has always remained a trusted choices when it comes to digital currency investments as well as trading around the world.
Security Breach
On Friday, the company found an unauthorized access to its exchange platform and soon after detected some malicious activities in their system. It was unable to restrict the hackers from stealing one of their familiar cryptocurrency named XEM (A Cryptocurrency issued by NEM Foundation). Soon after this, Coincheck suspended all the trading activities in their system except Bitcoin.
"I deeply apologize to the customers we have troubled."
- Yusuke Otsuka (Cheif Operating Officer of Coincheck)
The Tokyo-based exchange collapsed after accepting that it had lost 850,000 coins, worth around $480m at that time. Security breach and unauthorized access caused these coins to disappear from its vaults.
"They basically lost half a billion dollars worth of XEM. If they had a billion dollars in the bank they would be able to cover the losses easily"
- Jeff McDonald (vice-president of NEM Foundation)
Reason for security breach
Coincheck also declared the reason behind this security breach and how it was possible for the hackers to enter into their system without being authorized. Based on its report, NEM coins were stored in a hot wallet rather than a cold wallet (maintained offline). The reason for storing NEM in hot wallet is since Coincheck faced technical difficulties and shortage of staffs capable of handling with offline wallets. This attack has resulted the Japanese exchange to declare file bankruptcy.
The resulting NEM coin loss (around 58bn Yen) is greater than the value of bitcoin that disappeared from MtGox in the year 2014.
NEM Foundation has planned to tag the stolen coins and make it hard for the hackers to use the stolen currencies. It has also reached out to all the exchanges who trade NEM coins to halt NEM deposits in their paltforms.
Reimbursement to the victims
Coincheck said in their website announcement that they would repay the stolen XEM currencies to the respective 260,000 customers. It also said that it is yet to make the final decision on when and how to reimburse the missing cryptocurrency. The ability and net worth of the Coincheck remains unclear.
Japan has been one of the major countries to always support virtual currencies in the world. It has also thought of accepting virtual currencies as a mode of payments in the various sectors. Cryptocurrencies have seduced many Japanese investors especially youngsters to trade and invest. But after this major attack and the proven inability of one of their popular cryptocurrency platform, I guess the country has to revisit its policies on digital currency and its security measures.
I guess, it is worth mentioning here that Japan is one among very few countries to authorize and regulate the exchanges. It also remained the major reason behind the boosts in the price of Bitcoin during the year 2017.
Do you think cryptocurrency exchanges still need to work on their security measures and provide better platform for their clients? Comment your views...
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