It was exactly the kind of scene that Japan’s FSA had been hoping to avoid when it became one of the few regulators globally to introduce a licensing system for cryptocurrency exchanges last April.
That’s from a new Bloomberg piece documenting the fallout from last week’s rather unfortunate episode that found one of Japan’s largest cryptocurrency exchanges admitting it had “lost” some $400 million in “NEM coins”.
The “scene” Bloomberg is describing apparently involved furious Japanese customers huddled together in the freezing cold outside the exchange’s headquarters which, hilariously, is only “an eight-minute walk from the site where Mt. Gox imploded” four years ago.
We mercilessly lampooned this boondoggle on Friday and one of the points we made was that anyone who is angry should direct that anger at Japan for the above-mentioned decision to license these exchanges. Specifically, we said this:
Just to be clear, this looks like the largest theft in the history of cryptocurrencies. And while everyone — including Japan’s Financial Services Agency — is “looking into it”, the bottom line here is that anyone who ends up losing money needs to ask the Japanese government why they’re allowing these exchanges to operate in the first place. This one was actually “unlicensed” (their request was pending), but why is Japan “licensing” this at all? Why would you encourage this? It’s insane and it’s going to sound so wildly ridiculous in retrospect that I’m not sure how anyone who sanctions it is going to recover from the reputational damage.
Well come to find out, the situation was even worse than we thought because as Bloomberg goes on to detail in the piece linked above, “the thief was able to seize such a large sum in part because Coincheck lacked basic security protocols.” Let that sink in. They were encouraging trading in make-believe internet money and thereby facilitating wild speculation in assets that aren’t really assets and then they exacerbated the situation by not even bothering to implement “basic” security measures.
Over the weekend, they promised to refund the lost money in a comically absurd blog post that actually ended with Coincheck literally saying “sorry for the inconvenience.” Why yes, Coincheck, that is a bit of an “inconvenience” – you lost nearly a half billion fucking dollars of people’s money after providing them with a platform to trade shit that has no value in the first place and just in case anyone needed further evidence of your lack of regard for people’s financial well-being, you didn’t have the proper security protocols in place.
But this should be fine and nothing like this will ever happen again because Japan has asked Coincheck to “improve their operations”.
Japanâ€™s FSA to Issue Improvement Order to Coincheck Mon.: Nikkei
lol. "improvement"… where that means "don't lose half a billion dollars to hackers"
— Heisenberg Report (@heisenbergrpt) January 28, 2018
And being the good folks that they are, Coincheck has graciously decided to accept that recommendation:
- COINCHECK: EARNESTLY ACCEPT TERMS OF FSA ORDER
As far as anyone knows, there’s still no timeline on the promised refunds and in an extra slap in the face to the gullible morons who are out money here, Coincheck crypto-splained the lack of security protocols as follows:
The technology is difficult and [there was] a lack of staff able to carry out the task.
Meanwhile, the cryptocrowd apparently sees nothing at all wrong with this because look:
Give me a break, folks. How much evidence do you need to know that this is going to crash and burn in spectacular fashion?