CoinCheck To Refund Crypto Customers After Massive Hack

Around 260,000 CoinCheck customers, mostly based in Japan, are said to have been affected by one of the largest cryptocurrency thefts in history.

CoinCheck, a prominent Japan-based cryptocurrency exchange has promised to use its own funds to reimburse more than 46bn yen (almost $500 million) to customers who lost their NEM cryptocurrency coins on Friday. The CoinCheck exchange said it would use its cash reserves to reimburse the 46.3 billion Yen to the 260,000 people who lost their NEM holdings.

NEM is the the world’s 10th-biggest cryptocurrency by market capitalization, and in a sign of just how much of a major hub of digital currency Japan is, nearly one-third of global bitcoin transactions were denominated in yen last month, according to the specialist website jpbitcoin.com. CoinCheck also often refers to itself as “the leading bitcoin and cryptocurrency exchange in Asia”.

The NEM cryptocurrency that was stolen from CoinCheck was one of the largest digital thefts of all time.

Hot wallet

CoinCheck have said that the NEM cryptocurrency is the only one of its digital coins that was affected by the hack.

CoinCheck was keeping its NEM coins stored in a ‘hot’ wallet instead of using the far more secure and virtually unhackable cold wallet technology which is kept offline. The reason for doing so apparently came down to technical difficulties and a shortage of suitably qualified staff who were capable of dealing with the way that NEM conducts its transactions.

Don’t Panic, yet

“We know where the funds were sent,” Company chief operating officer Yusuke Otsuka  said. “We are tracing them and if we’re able to continue tracking, it may be possible to recover them.”

After the breach was discovered, the company froze all deposits and withdrawals for all cryptocurrencies except Bitcoin, as it scrambled to assess its losses in NEM. The Tokyo-based company suspended trading after detecting “unauthorised access” on its digital exchange.

Worse to come?

Local Japanese media were quick to report that the Financial Services Agency has already begun an investigation into the hack, and were expected to take action against the company swiftly in a move designed as much to show it was serious about regulating the nascent cryptocurrency market.

Cryptocurrency in Japan is far more accepted than it is in other markets, such as the USA and Europe. As many as 10,000 businesses accept payment in Bitcoin, and last year, the country started to require that cryptocurrency exchange operators registered with the government.

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