Rakuten Wallet is one of several major crypto-asset platforms arriving in Japan in the coming weeks, even as authorities battle against soaring losses due to theft and scams
Rakuten, Japan’s biggest e-commerce platform, has begun taking applications for a cryptocurrency exchange it plans to launch in June, as the country pushes ahead with efforts to tap into the market for virtual assets to spur economic growth.
The move came as Japan’s finance regulator, the the Financial Services Agency (FSA), is reportedly preparing to tighten regulations on the so-called “cold wallets” used to store virtual currencies offline.
In 2017Japan became the first country to regulate cryptocurrency exchanges at a national level, and there are currently 19 registered exchanges in the country, including some that are not yet operational.
Rakuten took over an exchange called Everybody’s Bitcoin last year, and brought in changes that allowed it to obtain a license from the FSA in December.
The FSA had previously cited the exchange for lapses in its management controls.
Rakuten began taking applications for the platform’s relaunch as Rakuten Wallet on Monday, with applicants required to supply a Rakuten user ID and associated bank account.
A number of major players are set to launch cryptocurrency exchanges in Japan in the coming weeks, with DeCurret, a start-up backed by more than a dozen major Japanese companies, planning to launch services on Tuesday and TaoTao, backed by Yahoo Japan, set for launch next month.
Local media reports said the Rakuten service would use “cold wallets”, which are not connected to the internet, for the storage of virtual currencies, and would also introduce an AI-powered chat service providing 24-hour responses to customer inquiries.
Following a number of security incidents last year, the FSA last year restricted the use of internet-connected “hot wallets”, prompting exchanges to switch to “cold wallets”.
But the FSA has identified additional security risks around cold wallets, such as the risk of compromise by internal staff, and is planning further restrictions, according to a Reuters report on Tuesday that cited unnamed sources.
For instance, some exchanges failed to ensure that the staff member in charge of currency storage was regularly rotated out, the report said.
As a result the FSA is reportedly planning to require exchanges to strengthen such internal controls.
In January 2018, in the biggest cryptocurrency theft to date, hackers used a vulnerability in the Tokyo-based Coincheck exchange to steal cryptocurrency worth approximately $530 million (£405m) at the time.
The second-biggest cryptocurrency theft also occurred in Japan, at the now-defunct Mt Gox exchange, which filed for bankruptcy in 2014.
At the time Mt Gox said Bitcoin worth more than $450m at the time was missing from its accounts, and a computer security firm later determined that most or all of the missing funds had been stolen directly from the exchange’s internet-connected wallets.
Worldwide, thefts and scams involving cryptocurrencies soared 400 percent to $1.7bn in 2018, according to California-based researcher CipherTrace.