It’s been a year since the cryptocurrency exchange in Japan Coincheck suffered one of the worst hacking incidents in the history of the crypto industry. Trying to leave the jolt behind, the exchange is now focusing on to rebuild its reputation and gain customers’ faith back. The founder of the exchange, Koichiro Wada, has attended a press conference which had been organized to assure the customers that the exchange has learned from its past mistakes. Interestingly, Wada was not the one who did the talking rather he sat beside Toshihiko Katsuya who is the new president of the exchange after the Monex group – a well-known conglomerate in the Japanese financial services industry – acquired Coincheck in last April.
Addressing the media, Katsuya said that the rich legacy and experience of the Monex in the securities business for 20 years had enabled the company to raise the Coincheck level to new heights. However, the crypto segment of the Monex group is itself in trouble as the company reported a loss of $10 million in the period from April to December last year. Monex followed the business strategy of acquiring troubled crypto exchanges and now feeling it difficult to sustain the business in the face of declining Bitcoin and other cryptocurrency prices.
Strategy to regain Investors’ trust
One of the effective measures to regain the trust of the investors is to replace the founders of the exchanges with the professional managers, just like what Monex did. Following the same path, one of Japan’s largest cryptocurrency exchanges has recently replaced the founder Yuzo Kano with banking veteran Yoshio Hirako who enjoys a cult status in the Japanese financial industry. bitFlyer Holdings which runs this exchange emphasized that the company wants to “strengthen the management structure and build the corporate governance” through this replacement. Similarly, founder of the Zaif cryptocurrency exchange, Takao Asayama is no longer at the helm of the company’s affairs after the exchange was taken over by the Fisco – financial information service provider – in November last year.
Hacking Incidents and Industry Scenario
Japanese traders are known for their yield-hungry nature, and the country itself is regarded as an attractive destination for crypto trading. However, it’s also true that Japan has been worst affected by the hacking incidents which are considered by many a reason behind fall in the value of Bitcoin. One of the worst incidents involved theft of cryptocurrency worth 58 billion yen of investors from the Coincheck last year which prompted the financial arm of Japan’s government agency to suspend the approvals for any new crypto exchange. The agency also slapped penalties on the existing exchanges, thereby, severely affecting their operations and marketing efforts. However, despite all these regulatory actions, Japan witnessed another theft worth 6.7 billion yen from Zaif in September last year.
Following the hacks, stringent regulations came into force with many established financial technology firms adopting strict criteria for acquiring the troubled cryptocurrency exchanges. Along with the Fisco and Monex, Rakuten (e-commerce giant) and Yahoo Japan (online media company) have also taken a plunge in the crypto business, albeit in a conscious, vigilant, and phased manner. Industry analysts believe that the large influx of companies in the crypto industry is in the long-term interest of the sector. This will help to rebuild the faith of the investors and help the industry to adopt innovations for enhancing the safety and security of the digital assets. On the larger perspective though these acquisitions signal that companies are still upbeat about the prospects of the crypto industry despite the ongoing bear phase for the crypto that has now stretched for more than a year now. According to jpbitcoin.com, ten local exchanges in Japan had traded Bitcoin worth 731 billion yen in December last year which is 90% down from what these exchanges traded in the same period the previous year. Nonetheless, the intensified scrutiny of the crypto industry in Japan can act as a role model for other Asian economies which are also trying to come around the concept of digital currency and blockchain technology.
Downside of Professional Management
The growing influence of professional managers to head cryptocurrency exchanges is not devoid of its demerits. Experts believe that this managerial dominance has subdued the entrepreneurial drive in the country which is already suffering from the lack of startup culture. Some others are of the viewpoint that behind these regulations, the real motive is to establish political dominance over the crypto industry. Many executives believe that the business environment in the US and China are far more conducive for the crypto industry than what Japan has on offer. Still, many independent crypto exchanges see the stringent regulations as an opportunity to expand their businesses. Take, for example, the comments made by the president of Bitpoint Japan cryptocurrency exchange, Genki Oda, who is happy with tightening regulatory framework which deters the brokerages and bigger banks to enter into the industry. This, in turn, helps to keep the number of competitors to a minimum which bodes well for the existing players in the industry. Oda revealed that he had received several offers to sell the exchange after the hacking incident, but considering the long-term potential of cryptocurrency and blockchain technology, he has decided to stay put with the business.