Losing $530 million in a newly regulated business is the fastest way to get the government looking into your affairs. So it’s no surprise that Japan’s Financial Services Agency (FSA) has decided to investigate Coincheck after hackers stole $530 million from the cryptocurrency exchange last week. Coincheck already has announced it will return 90 percent of the money. But the company has provided no timetable. (CNBC)
The key facts
The FSA said it ordered Coincheck to submit a report on the hack and measures for preventing a recurrence by Feb. 13, and that it will, if necessary, conduct on-site inspections of other cryptocurrency exchanges. The regulator also said it has yet to confirm whether Coincheck had sufficient funds for the reimbursement. (CNBC)
The smart take: Japan began regulating cryptocurrency exchanges last year and believes fintech will be a boon to the nation’s economy. How the government and Coincheck handle this crisis is a major test for both the industry and regulators. Neither can afford a misstep.
If the company doesn’t handle the crisis well, it invites more regulatory oversight and intervention into exchanges. If the FSA responds with a heavy hand, it could choke the industry. If the FSA responds too leniently, it could undermine public confidence.
Most regulated industries suffer through growing pains — especially as regulators and entrepreneurs work together to find the right balance between regulation and innovation. This situation is no different.