Japanese crypto exchange says US$400 million in NEM currency lost

Coincheck, one of Japan’s biggest digital exchanges, said that about US$400 million of the NEM cryptocurrency was lost after it was sent “illicitly” outside the venue, spooking investors in a country that is still wary of digital-token exchanges four years after the collapse of Mt. Gox.

Company officials said during a late night press conference at the Tokyo Stock Exchange that they didn’t know how the 500 million NEM coins went missing, but they’re working to ensure the safety of all client assets. In a series of tweets earlier, Coincheck said it had suspended all withdrawals, halted trading in all tokens except bitcoin, and stopped deposits into NEM coins.

NEM, the 10th-largest cryptocurrency by market value, fell 14 per cent to 81 US cents in the 24 hours through 10:07am. New York time, according to Coinmarketcap.com. Bitcoin dropped 4 per cent and Ripple retreated 8.3 per cent in that period, according to prices available on Bloomberg.

“Investors and traders are very sensitive to any news involving the big exchanges,” said Peter Sin, a trader and co-head of the digital currency subcommittee at ACCESS, a Singapore-based cryptocurrency and blockchain industry association. “This will accelerate price declines.”

Cryptocurrency exchanges, many of which operate with little to no regulation, have suffered a spate of outages and hacks amid the trading boom that propelled bitcoin and its peers to record highs last year.

Like bitcoin, NEM is a cryptocurrency built on top of blockchain, but it uses a more environmentally-friendly method to confirm transactions, according to its website. Bitcoin mining requires significant computing power, while NEM says it does not.

In Japan, one of the world’s biggest markets for cryptocurrencies, policymakers have introduced a licensing system to increase oversight of local venues, seeking to avoid a repeat of the Mt. Gox exchange collapse that roiled cryptocurrency markets worldwide in 2014. Coincheck has yet to receive a license, according to the website of Japan’s financial regulator.

Coincheck, founded in 2012, had 71 employees as of July with headquarters in Tokyo’s Shibuya district, an area popular with start-ups that was also home to Mt. Gox, according to Coincheck’s website. Last year, it began running commercials on national television featuring popular local comedian Tetsuro Degawa.