After the recent loud cracking of the Coincheck exchange, which stole more than $ 500 billion, Japanese trust banks plan to offer new ways to protect cryptocurrency investors through the management of digital assets of exchanges.
Such services should ensure the safety of clients’ funds even in the event of bankruptcy of exchanges.
Now, apart from lending, taking savings and performing trust operations, trust banks will be able to expand the range of services offered, covering the cryptocurrency industry. According to the plan, users of crypto-exchanges will enter into trade transactions, but banks will manage the funds. The exchanges themselves will become just intermediaries between traders and financial institutions.
The first who is expected to implement such an initiative already in April will be Mitsubishi UFJ Trust and Banking and Sumitomo Mitsui Trust Bank.
The new law on payment services, which took effect in April last year, requires that exchanges manage user funds separately from their own. However, the newspaper notes, many Japanese crypto-exchanges are small start-ups with limited investment opportunities, and often they consider users’ means as their own. And the latest incident with Coincheck, the second-largest crypto-exchange in Japan, has shown that large platforms are also at risk, whose capabilities in terms of providing protection are much broader.
Guarantees for the return of funds to investors in the event of fraud, burglary or bankruptcy, as a rule, do not, and this is exactly what Mitsubishi UFJ Trust and Banking wants to solve. The current legislation requires that, in the case of crypto-exchanges, users’ funds be stored on “cold” wallets that are not connected to the network. Additionally, the bank is going to create numerous keys to online purses to prevent unauthorized access and withdrawal of large amounts.
It is assumed that cooperation with trust banks will help exchanges make transactions more secure, but there are also fears that they can become more lengthy. Nevertheless, as the incident with Coincheck showed, security and safety issues are increasingly important for clients.