A self-regulatory group created to sustain Japan’s cryptocurrency sector is tightening rules on how much cryptocurrency exchanges are allowed to store in “hot wallets” connected directly to the Internet, Japan Times reports.
The change is being advised about two weeks after hackers stole $60 million in Bitcoin, Bitcoin Cash and MonaCoin from the Japan-based Zaif crypto exchange, and about 8 months after hackers stole $500 million from the Coincheck exchange.
“Informed sources” to The Japan Times say the industry self-regulator, The Japan Virtual Currency Exchange Association, will probably advise that exchanges hold no more than 10-20% of the crypto they manage online.
Storing crypto online or at exchanges is generally frowned upon by crypto and Bitcoin advocates given several calamitous early day hacks on the Mt Gox exchange and others.
Offline, or “cold” storage is considered standard best practice across much of the industry.
That so much crypto was pooled online by Coincheck and Zaif suggests ignorance, recklessness or that storing crypto properly (in offline “cold wallets”) was either too expensive or too slow.
Revisions regarding safe crypto custody will reportedly be made to rules determined by the The Japan Virtual Currency Exchange Association earlier this year, in July.
Prior to the hack on Zaif, the company reportedly received two business improvement orders from Japan’s Financial Services Authority (FSA).
On September 25th, after finding that Zaif had failed to produce a comprehensive report on the September 14th hack, the FSA issued a third business improvement order to Zaif, giving them two days to produce a report explaining the hack and the company’s remediation plans in detail.