Coincheck to Stop Dealing With Anonymous Zcash, Monero, and Dash

Coincheck to Stop Dealing With Anonymous Zcash, Monero, and Dash

March 22, 2018 Off Sydney Ifergan By Sydney Ifergan

Coincheck has announced that it will stop dealing with Dash, Zcash (ZEC), and Monero (XMR), saying that it has recognized the risks the digital currencies pose. The Japanese crypto exchange lost NEM worth about USD 550 million in a hack that saw it suspend operations. Cyber-security experts now say that about half of the digital currency lost in the hack has probably already been converted on the darknet.

Coincheck, which is still trying to recover from the hack-arguably the worst in crypto history, says the three cryptos provide very high anonymity levels. The Japan Times reports that the exchange recognizes the high risks presented when the digital coins are used in money-laundering.

Identifying the recipients of money denominated in these cryptos on their blockchains is virtually impossible. This is probably the primary reason Coincheck made the decision. The anonymity of the cryptos facilitates the possibility of them being used in money-laundering activities, which is usually not the case in other cryptocurrencies like bitcoin. The company now considers buying digital coins at fixed rates from clients agreeing to sell. It will be accepting transactions from its accounts whose holders have been verified.

The crypto exchange applied for registration under the newly revised payment services laws, but the application is pending partly because Coincheck is working with anonymous clients. The application was submitted before the hack in September 2017 with the FSA (Financial Services Agency), but as the Japan Times points out, the screening is obviously taking longer than is expected. The exchange suspended trading immediately after the hack, and when operations resumed last week Monday, the 3 digital coins were reportedly not among the options available.

Stolen coins already converted 

The NEM coins which were stolen during the January hack were worth an estimated ¥58 billion, which is an equivalent of about USD 550 million. Earlier this month, reliable media sources reported that the Japanese company announced its plans to begin compensating the hack victims. The exchange announced, on Tuesday, that it had already refunded a total of ¥46.6 billion, about USD 440 million, to up to 260, 000 customers.

A cyber-security expert has suggested that the hackers might have already converted at least half of the stolen NEM into fiat cash or other coins to launder the funds. Masanori Kusunoki, the Chief Technology Officer of Japan Digital Design, says that the hackers may probably have done the conversion through a darknet site. He says the conversion began on February 7th.

Mr. Kusunoki explains that it is getting harder to trace the stolen coins. He believes that scammers are still using the website for money-laundering transactions. “It is getting more evident that it is hard to block money laundering just because the transactions are recorded,” the cyber-security expert concluded.

Kusunoki also says that it will be difficult to reverse the damages regardless of how far the chase goes. In February, Coincheck informed the Financial Services Agency about the security measures it planned to take after the hack. Over ¥40 billion was reportedly cashed out immediately the company resumed yen withdrawals. A couple of days later, about 132 crypto investors filed a suit with a Tokyo court demanding for ¥228 million.

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