By David Drake
and their underlying technology, , have made it possible for developers to innovate solutions for pressing problems in different sectors. This has caused an emergence of startups such as that makes digital monetization easier, that provides backed solutions in the industry and that is focused on portfolio optimization.
At the same time, technology is changing the way people interact and how businesses market their products or services. Startups such as enhances social media security that and that improves family interactions using smart contracts are transforming the social space. In the marketing space, is enhancing interactive marketing while is making it possible to market digital coupons.
Despite these innovations, the roller coaster ride has reached an incline. In Asia, is boosting its security measures in a bid to prevent further hacking after Zaif was hacked early last month. Investors have lost more than $60 million dollars in this most recent incident, which has forced the Virtual Currency Exchange Association (JVCEA), a self-regulatory body comprising some of the major exchanges in the country, to institute self-imposed regulations.
Restrictions
The JVCEA plans to mitigate future losses by restricting the management of online to anywhere between 10 and 20 percent of customer deposits. It is also going to coerce exchanges into managing only a limited number of digital assets at any given time. Of the over $60 million dollars stolen from Japanese crypto exchange, Zaif, $40 million was managed exclusively online. This made it an easy target for sophisticated hackers.
Back in January, Coincheck, another Japanese based exchange, suffered a staggering loss to the tune of $523 million to hackers. The nature of is to provide a decentralized service, and to offer quick and easy access to their digital assets. As such, majority of deposits were held in virtual accounts, making them prime targets for bad actors. With the new measures in place, it will be a little bit more difficult for exchanges and to hop onboard.
The Financial Services Agency (FSA) has increased by fourfold the questions used in the screening process to register as an exchange. Customers will also be thoroughly vetted to ensure that the integrity of exchanges is upheld.
The Effects
The overall aim of imposing restrictions is to sustain usage of this new digital asset as well as make the process as seamless and as hacker-free as possible. However, according to Jack Bensimon, Chief Compliance Officer ofBlockvest, it is difficult to make the industry completely free of theft.
He says, “No exchange is ever likely to be completely free of hacks or crypto theft. Hacks are likely to get more severe and sophisticated as this industry matures, while proactive measures by exchanges and regulators will also evolve and be enhanced. Like criminals, hackers are usually a few steps ahead of exchanges and regulators.”
seems to be realizing the ever present risk of hacking and taking steps to build confidence in the industry. “’s forward thinking in shoring up regulatory guidance and firm position on crypto exchanges, helps to build trust and confidence in the buying and selling of crypto on exchanges. Anything to secure mass of crypto, including enacting legislation to reduce the incidence of exchange hacking of , is a major step in the right direction,” Bensimon adds.
In addition to responding to questions during the screening process, applicants are required to provide detailed reports of board meetings to ensure they have done their due diligence in managing digital assets online. Whether these measures will aid in curbing online hacking is yet to be seen. So far, they have only contributed to the evolution of from being a decentralized form of financing to a more regularized and centralized one.
“It certainly looks like centralized crypto exchanges will soon be treated under the same regulations and controls as other monetary institutions. Then again, did that ever prevent large scale fraud (Madoff), irrational exuberance (Lehman) or simply human mistakes (think of flash crashes)? The promise is really a different one: that of decentralization, governance by code, making government influence and control unnecessary. The future of exchanges is decentralized, with no institution answering to governments,” said Simon Cocking, Editor in Chief at.
The JVCEA was formed shortly after the Coincheck hacking in January, but was still unable to prevent Zaif from being subject to the same early in September. The new measures that regulators in have initiated may not be sufficient to rid exchanges of hacking attempts. But, if everything goes according to plan and the FSA approves the plans submitted by the JVCEA in July, the overall loss from potential future hackings will be significantly less.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.
Published at Wed, 22 May 2019 12:10:15 +0000
