Maybe Japan’s Rush to Create New Cryptocurrency, Wasn’t Such a Good Idea

A group of cryptocurrency traders will file a lawsuit against Coincheck Inc on Thursday over theft of $530 million (£382 million) in digital money from the Tokyo-based exchange that happened in January.

The total number of ten traders will then file the claim at the Tokyo District Court over Coincheck’s freezing of cryptocurrency withdrawals, Hiromu Mochizuki, a lawyer representing the plaintiffs, told Reuters.

Coincheck Inc. users also withdrew 40.1 billion yen ($373 million) from the cryptocurrency exchange on Tuesday, the first day customers were allowed to pull out and that triggered the exodus of money. Chief Operating Officer Yusuke Otsuka is still saying that they will compensate users but he didn’t want to explain the root causes of the heist.

What actually happened is that during the aftermath of this multi-million hack of NEM tokens, Coincheck stopped transactions on its platform that left plenty of virtual wealth frozen in the whole process.

The suit now demands that “Coincheck let the plaintiffs withdraw their virtual currencies in order to remove them from the platform and relocate the coins to external wallets”.

This heist exposed apparent problems in Japan’s crypto-regulating system and also raised questions over the policy makers and their knowledge and possibilities to oversee the industry .

FSA inspectors are now trying to see does the Coincheck even have the financial strength to give back some 260,000 holders of NEM coins to the tune of ¥46 billion.

Financial services minister Taro Aso said the watchdog agency will urge Coincheck to prioritize customer protection. “Through our on-site inspections, we will make sure that customers are protected,” Aso said after a Cabinet meeting.

Coincheck is one of 16 operators of virtual currency exchanges awaiting regulatory approval. Another 16 have already won approval under Japan’s law requiring exchange operators to register.

Teuta Franjkovic

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