Source: iStock/ooyoo

Japan’s financial regulator, the Financial Services Agency (FSA), has broken its silence following the USD 62.5m hack on Osaka-based cryptocurrency exchange Zaif earlier this month.

Following news of the hack, the FSA dispatched an investigatory team to the premises of Zaif’s operator, Tech Bureau. That preliminary investigation is now over, but it appears the FSA was not satisfied with what it heard – and has responded by serving the company with a third business improvement order.

Per the Japan Times, a senior FSA official told reporters, “We have not received enough explanation on what exactly happened. What [Tech Bureau] told us is that an employee’s PC was hacked. It is extremely regrettable that such an incident happened after the company had already been given two business improvement orders.”

The FSA has published the full details of the new order, and says it expects Tech Bureau to respond in full by September 27. The agency has demanded to know the full details of the hack, how Tech Bureau will prevent further losses and how it intends to reimburse customers (the vast majority of the USD 62.5m stolen was taken from customer hot wallets).

The previous two business improvement orders have called on Tech Bureau to improve its risk management system, customer policies and legal compliance. The FSA also wants the company to prove it is doing enough to fight money laundering and terrorist financing, and had previously urged the platform to improve its hot and cold wallet usage, in order to separate its own funds from those of its customers.

For its part, Tech Bureau is remaining tight-lipped on the matter. Multiple major news agencies say the company has ignored calls for comment – but the company is hopeful it will satisfy the FSA’s requests. In a company statement issued yesterday, Tech Bureau reiterated that it is expects to obtaining over USD 44 million of funding from Fisco, an investment group, and the operator of a rival exchange platform. Tech Bureau adds that it plans to improve its operations in order to “regain customer trust.”

Rival platforms have also had their say on the hack. Yoshitaka Kitao, the CEO of SBI Group Holdings, the operator of the SBI Virtual Currencies exchange, told at a fintech conference in Tokyo, “The cryptocurrency industry is still unstable, and there are particular problems regarding safety.” Kitao said that self-regulation could provide the key, claiming, “[Japanese exchanges] need to adopt and adhere to a strict set of voluntary rules.”