The Japanese financial regulator plans to require crypto exchanges in Japan to reinforce their internal oversight of so-called “cold wallet” used for storing cryptocurrency. Reuters reported this on the 16th of April.
Reinforcing Internal Oversight
Reuters reported that a source with a direct knowledge informed the news outlet that the Japanese financial service agency FSA, will require the crypto exchanges to reinforce their internal oversight. The step is particularly aimed at ensuring the security of virtual currencies as well as security in the country as it aims at leveraging the fintech industry to stimulate economic growth.
The FSA restricted the use of less secure hot wallets, where virtual currencies are stored on platforms directly connected to the internet last year. This is due to a series of security breaches at exchanges. The restriction promoted the adoption of cold storage by crypto exchanges. Cold storage is a storage device that is not connected to the internet, which makes it more secure than hot storage.
However, the FSA still sees the vulnerability of internal theft with the cold wallet according to Reuters. It was noted that some exchanges failed to have rules where the person in charge of cold storage would be regularly rotated out. Hence, the FSA plans to order exchanges that deem to have security lapses to improve their security according to Reuters’s source which declined to be identified because it is not yet made public. Also, FSA is yet to make an official statement on this.
At the moment there are 19 registered crypto exchanges in Japan, though it includes some that are not operational. Also, Japan leads in the crypto adoption and regulation race in the world.
In 2017, Japan became the first country in the world to regulate cryptocurrency exchanges at a national level. Despite the level of regulations and security, Last year hackers stole $530 million of digital money from a Tokyo-based exchange.
The efforts of the Japanese financial regulator is aimed at improving the safety of the blockchain and crypto industry for its citizens as well as aid the annexation of its dividend for its growth and development. Some countries have equally taken this effort in recent times towards greater improvement of the industry. France, Malta among others have taken similar steps.
Notably, regulation of the crypto and blockchain space is essential for the growth of crypto adoption in the world. This will help in combating the menace of hackers as well as scam projects through government oversight.