According to an article in the local Japanese media, 662 million yen ($6.295 million) was lost in the country due to crypto-based hacking activities. The data was made known courtesy of the first ever tally that has been conducted by the Japanese police authorities.
2017 turned out to be a breakout year for cryptocurrencies in many respects as a number of crypto species appreciated tremendously in value. As a result, there has also been an increase in the instances of digital thefts targeted at these valuable cryptocurrencies.
149 Officially Reported Cases
The National Police Agency of Japan has stated that there were 149 confirmed cases of cryptocurrency hacks in the country throughout the year 2017. With the chaotic nature of the market and the difficulty in gathering all the information pertaining to crypto transactions, it could well be that the figure is indeed higher than 149. A considerable portion of illicit crypto activities also occurs beyond the reach of conventional law enforcement.
The agency further revealed that no less than 16 cryptocurrency exchanges that are registered with the FSA were the victims of cyberheists in 2017. Cryptocurrency exchange platforms have been a target for hackers since the inception of the crypto market. While the blockchain is almost impossible to hack due to its decentralized nature, the mainstream crypto exchange platforms are centralized. This creates the possibility of a single-point-of-entry scenario that can be exploited by hackers to steal cryptocurrencies.
Inadequate security measures appear to be a major reason why hackers were able to breach the user wallets of many people in most of the cases reported by the police. In 122 out of the 149 recorded cases (80 percent), only basic user ID and password authentication were required to gain access to the user wallets. This is a startling indictment of the inadequate security infrastructure used by a number of exchange platforms in the country. The absence of two-factor authentication makes it easier for hackers to access the cryptocurrency wallets of unsuspecting users.
The Coincheck Heist and the FSA Crackdown
In January 2018, about 58 billion yen ($550 million) in XEM tokens was stolen from Coincheck, a cryptocurrency exchange platform based in Japan. It has since been described as the largest cryptocurrency hack in the history of the market. In the aftermath of the heist, the platform has under increased scrutiny especially from the country’s Financial Services Agency (FSA) over what it describes as inadequate security infrastructure. In response to the heist, the platform has stopped offering support for a trio of privacy-focused cryptocurrencies. The theft is still being investigated by the police in Japan as there are suspicions that the heist was orchestrated by means of a virus-laden email that was sent to Coincheck employees.
The FSA has also taken decisive steps to try to restore sanity to the market. Already, many exchange platforms in the country have had their licenses terminated. Binance, the largest cryptocurrency exchange platform in the world regarding trading volume has also reportedly drawn the ire of the FSA.