In January of 2018, Coincheck, Japan’s largest crypto exchange joined the list of exchanges compromised by a devastating hack. Cyber thieves took advantage of a flaw in their platform to steal 523 million units of NEM’s digital currency. Although Coincheck accepted responsibility for the hack and spent $435 million to compensate users, the incident was disastrous for the company.
Before the hack, the exchange had trading volumes that rivaled the Tokyo stock exchange, but in the aftermath, Coincheck users withdrew more than $500 million from the exchange, and the ownership team was ousted. In April 2018, it was announced that Coincheck will be sold to Monex Group for $34 million, initiating a new era for the company.
Now, under new management, the exchange is working to resume business.
A Comeback Story
For exchange owners, there is no definite protocol for responding to a hack. While Mt. Gox famously plunged into bankruptcy almost immediately following a heist on their exchange, others have improved their systems and continue to be successful after a breach.
Coincheck is pursuing that latter scenario.
Since acquiring the exchange, Bloomberg reports that Monex made significant investments in security upgrades to both protect the currencies on their exchange and to restore customer confidence in their platform.
Consequently, Coincheck expects an official exchange license from Japan to signal when they are situated to return to the prominent position they held before the January attack.
In addition, Coincheck plans to expand operations by bringing its exchange platform to the United States. Details on these plans were not discussed but in an interview with Bloomberg Crypto, new Monex Chief Executive Office, Oki Matsumoto, said:
“Japan may seem like it’s one step ahead in crypto, but in terms of deciding what’s a security or a token and attracting institutional investors, the U.S. and Europe are moving ahead.”
Indeed, while U.S. investors anxiously await word of impending regulations, there is a growing interest in crypto-based financial products at mainstream U.S. financial institutions. Commodity exchanges Cboe and CME have offered Bitcoin futures since December 2017, Goldman Sachs is expected to launch a Bitcoin trading desk, and the parent company for the New York Stock Exchange is rumored to be developing its own crypto trading platform.
So, while Japan may be more open towards cryptocurrencies, Coincheck is expressing confidence in crypto’s maturation in the U.S. as well.
Crypto Is Good for Business
As Coincheck strives to complete a comeback, Monex is embracing a significant amount of risk. Although the price of their exchange was relatively low, their stock has doubled since the acquisition.
Its continued success will depend upon its ability to restore customer confidence and to retain its place in the Japanese crypto economy, but its expansion into the U.S. could provide a significant boost as well.
Crypto analyst, Yuji Nakamuratwit, notes that Monex already has 600 employees in the U.S. because of their online stock brokerage firm, indicating they have a base to build on.
Ultimately, Monex and Coincheck may be looking toward an eventual expansion into the U.S. to bring in new business to help revive their brand and drive new revenue streams.
Cover Photo by Alex Knight on Unsplash