Sixteen cryptocurrency exchanges in Japan are joining forces to create a self-regulating body that will oversee crypto markets within the country in response to the hack of the Coincheck exchange in January, Reuters reported today.

The as yet to be named body could be formed as soon as next week and comes after a failed attempt to merge two existing industry bodies, the Japan Cryptocurrency Business Association and Japan Blockchain Association that were being discussed as recently as Feb. 15.

Details of what form the new body will take are slim, but the report claimed that it will be registered with the Financial Services Agency. The Japanese government agency and integrated financial regulator is responsible for overseeing banking, securities and insurance sectors in order to ensure the stability of the financial system of Japan. The same agency was tasked by Financial Services Minister Taro Aso Feb. 16 to conduct onsite inspections of 15 virtual currency exchange operators in the nation that have filed for certification with regulatory authorities.

The move to establish a self-regulatory body is said to be strictly in response to the hacking and subsequent theft of between $400 million and $530 million in NEM tokens from Japanese exchange Coincheck Inc. in January. Although the company promised to refund users who had their NEM tokens stolen, the case not only resulted in legal action but also raised questions about existing Japanese regulations that started with the legalization of bitcoin in April.

One of the issues is an FSA rule that requires exchanges to operate robust computer systems and address risk management but leaves the storage of assets to a set of nonbinding guidelines. According to one report, the lack of binding rules resulted in Coincheck holding NEM tokens in an online “hot wallet” that allowed them to be stolen.

Photo: Nesnad/Wikimedia Commons