April 19, 2019, | AtoZ Markets - The Japanese Financial Services Agency (FSA) is going to set up new regulations in relation to the cold wallets for the storage of cryptocurrencies for cryptocurrency exchanges. According to the report, the financial regulator of Japan is going to need stricter internal supervision of the cold storage wallets or offline wallets within the crypto exchanges.
Japan Cold Storage regulation to be established soon
The Financial Services Agency of Japan is going to mark the issues of protecting the security of the cryptocurrencies and other endangers to the country by establishing new regulations since the agency wants to uplift the FinTech industry in order to encourage the economic growth.
Moreover, even though the cold storage wallets are in offline mode, which is not connected to the internet and are considered a lot safer than the online wallets available in the crypto market. Japan’s FSA is considering the internal thefts within the organization itself. Currently, a lot of licensed cryptocurrency exchanges in Japan do not have a procedure of rotating the individual responsible for the cold storage wallets.
Risks in cryptocurrency exchange cold storage
On October 2018, the FSA authorities had already mediated to limit as much as possible the use of the hot wallets, i.e. storage platforms directly connected online, establishing a relationship between hot wallets and cold wallets. But latter being accessible only outside the network and placing a threshold on what can be stored directly online.
Now the FSA’s control is shifting to cold wallets whose quality of preservation has not been under the eyes of the authorities until now. The FSA is also concerned that there may be risks related to thefts and hacking activities within the same exchanges. This might be because many companies do not have internal security procedures, such as multiple keys or rotation of managers.
In addition, every type of cold wallet, from paper to hardware to CDs, presents specific risks. The paper wallets can be destroyed, magnetic devices can be demagnetized, and even external devices are accessed by maintainers and programmers. All of this requires security procedures that keep customer funds safe and henceforth this aspect will also fall under the watchful eye of the FSA.
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