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The market capitalization of all cryptocurrencies is now half its peak marked at the beginning of the year.   © AP

Coincheck aims to resume operations next week

Regulator's conditions include paying compensation to heist victims

TOKYO -- Cryptocurrency exchange operator Coincheck, the target of a massive heist in late January, plans to resume partial operations sometime next week as Japanese regulators bolster efforts to protect customers.

The company ceased most virtual currency trading after the heist of 58 billion yen ($547 million) in NEM currency. Coincheck gradually will resume trading for those digital currencies it has deemed safe and may stop handling cryptocurrencies with a high degree of anonymity.

Coincheck said Thursday that it would start repaying victims next week. The announcement comes after the operator received its second business improvement order from Japan's Financial Services Agency, instructing the exchange to take actions such as a drastic review of management strategy and compensating affected customers. Coincheck looks to release details of its plan next week.

The Japanese company began accepting requests for withdrawals in the Japanese currency on Feb. 13 and has "already paid 60 billion yen in withdrawals," Chief Operating Officer Yusuke Otsuka told reporters Thursday.

"Issues like not being able to hire enough personnel emerged amid a rapid increase in customers due to rising prices for virtual currencies," CEO Koichiro Wada said in explaining the breach.

The operator sees a capital tie-up or coming under the auspices of another company as "options if it helps protect our customers," he added. Wada also said he will "consider" such measures as resigning to take responsibility for the incident.

Monthly trading in virtual currency on Coincheck's exchange totaled about 290 billion yen in July before exploding by a factor of 13 to roughly 3.85 trillion yen in December.

Coincheck CEO Koichiro Wada, left, and Chief Operating Officer Yusuke Otsuka apologize at a news conference in Tokyo on Thursday.

But in early January an English-language email containing a virus was sent to several employees, seemingly from a member of the company. Once the sender's address was clicked, the computer was infected with a virus that led to the NEM theft.

The security breach sparked new efforts by the Financial Services Agency to ensure safety among digital currency exchanges. Two operators, FSHO and BitStation, were ordered Thursday to suspend trading through April 7, during which time users may withdraw bitcoin and yen.

Exchanges that received business improvement orders are able to trade as usual but have until March 22 to submit those plans to the FSA.

Those exchanges that have not been penalized also are looking to restore trust. Sixteen operators registered with the FSA will set up a new industry group in April to formulate voluntary rules that include safety improvements and customer protection regulations.

Declining confidence in exchanges has invited falling prices for virtual currencies. Bitcoin's price dropped as much as 10% to under $10,000 on Thursday after the FSA's action. The cryptocurrency has plunged by around half from its high of $19,783 in December. NEM, which traded at just under $1 before the heist, stands at roughly one-third of that level. The value of all cryptocurrency totals about $400 billion, half of its peak at the beginning of this year.

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