As it attempts to boost economic activity by supporting the fintech industry, Japan continues to be one of the most active countries when it comes to regulating cryptocurrencies. According to rumors detailed by Reuters, a new series of rules for exchange platform will be implemented shortly, following security breaches in the past few years that dampened the confidence in cryptocurrencies.
Several big exchange hacks and Bitcoin thefts took place in Japan, with Mt. Gox and Coincheck as some of the important examples. Despite being the first country to regulate cryptocurrency exchanges back in 2017, companies based in Japan lost confidence as their client found themselves with some or all funds stolen by hackers due to security weaknesses.
New rules for cold wallets
The Financial Services Agency (FSA) took some immediate measures last year, restricting the use of cryptocurrency hot wallets, due to their reduced level of security. Those wallets could have been accessed via the internet, so exchanges had been forced to use cold wallets instead.
Despite being a good measure, internal theft seems to be another important threat. Exchanges do not have rules for a regular rotation of the person in charge of the cold wallets. We’ve seen how the Quadriga CX exchange scandal evolved last month when the founder of the company was the only person able to access cold wallets.
Although the FSA did not provide any information on the matter yet, it is very likely that new rules for storage might be implemented soon. A total of 19 exchange platforms can be found in Japan, even though not all of them are operational at the present time.
Even though some painful accidents took place in the past years, Japan continues to be one of the biggest markets for cryptocurrencies, as people still believe the blockchain technology will find many applications in the real economy, contributing to the increase in productivity.
Japan is well-known for its approach to self-regulation, but even though financial agencies let private experts in charge of some regulatory aspects, it does not want to let the industry on its own.
In a period when Chinese exchanges dominate the market, better security in Japan might convince customers to switch their choice. As a country with one of the biggest debt-to-GDP ratios in the world, Japan desperately needs to find ways to boost economic activity. That’s why innovation through the blockchain technology is now in the center spot.
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