Following Coincheck’s recent loss of over $500 million USD in cryptocurrency to hackers, it appears financial regulators in all corners of the world are cracking down on the industry. We should expect to see a lot more scrutiny and reporting requirements in the future — at the very least.
Subscribe to the Bitsonline YouTube channel for more great videos featuring industry insiders & experts
Coincheck’s debacle marks the second time since Mt. Gox that a Japanese cryptocurrency exchange has experienced insurmountable losses. While executives claim they are working to refund customers who were affected, the notion that digital currency is unsafe seems to be running rampant through every nook and cranny of the financial sector.
The Fight Starts at Home
Japan is leading security measures. The country’s financial regulators are now inspecting all virtual currency exchanges, and the Financial Services Agency (FSA) is ordering mandatory improvements on all crypto trading platforms, including the implementation of hot wallet storage and multi-sig authentication.
Cryptocurrency exchanges in Japan have also been required to register with government officials since spring of 2017.
Researcher at the NLI Institute Makoto Sakuma explained:
“It’s been long said that cryptocurrencies are a solid system, but cryptocurrency exchanges are not. This incident showed that the problem has not been solved at all. If Coincheck screw up its crisis management, that could deal a blow to the current cryptocurrency fever.”
The Battle Travels North
Thousands of miles away, Russia’s Finance Ministry is pushing a new bill that would dismiss the notion of cryptocurrency as money and officially label it as a “virtual asset.” It would also require bitcoin miners working in Russia to incorporate themselves and would place limits on cryptocurrency trading amongst those who are not registered as “qualified investors.”
“The bill needs to go through Parliament and, no doubt, will be amended,” said KeyICO partner Olga Sorokina. “We can at least see the base and the shape of the future law, now – the Russian authorities want to tightly control the cryptocurrency and tokens turnover (as they do) with the security market. Any legal transaction should go through a licensed operator, being under state control.”
Plastic Puts Up a Front
Perhaps the biggest standoff is coming from credit card companies – among them Bank of America and Citigroup – which are revamping their policies to either limit or fully ban cryptocurrency purchases.
Earlier this month, Bitsonline reported that Capital One was refusing to support crypto-purchases through credit cards or checking accounts, which ultimately caused several delayed or cancelled transactions. The move has caught on, as several other banks and credit institutions are following suit.
When discussing cryptocurrency, chief multi-asset strategist Mateos Y Lago explained that cryptocurrency is simply too volatile for established financial companies to take seriously:
“This [cryptocurrency] is a very new thing, and to us, at this stage, is not an investible asset class. This is not something we are advising anybody to put money in, unless they are willing to lose their entire stake.”
Prices Fall in Aftermath
Following the announcements surrounding newfound regulation, virtually every major cryptocurrency from bitcoin to ether experienced dips in their respective prices. At press time, bitcoin had fallen by almost five percent, while ether had fallen by four percent and Ripple’s XRP was down nearly seven percent.
Has the hype surrounding cryptocurrency taken a turn for the worse? Post your comments below.
Images via CNN, Pixabay