According to a Reuters report, the Japan Financial Services Commission (FSC) plans to introduce new rules to govern how cryptocurrency exchanges manage their cold wallets.
A cold wallet is a cryptocurrency wallet that is not connected to the internet, thus reducing the chances of hackers gaining access to it.
Citing a source close to the matter, Reuters notes that the FSC’s likely rules will cover how cryptocurrency exchanges can strengthen internal supervision of its cold wallets, to avoid any compromise.
Explicitly, the source confirmed that the FSC believes that even though cold wallets are less likely to get hacked, there is a high risk of internal theft. Most exchanges do not have a rule that mandates it to rotate the official who stays in charge of the cold wallet, the source said.
Creating new rules that enforce increased security for cold wallets will build on efforts that FSC made last year when it restricted crypto exchanges from storing significant amounts of cryptocurrency in hot wallets.
Aside from providing more security for cold wallets, the source also noted that the FSC would conduct a review of licensed exchanges and other any who were found wanting security-wise to improve.
The hack behind local exchanges such as Coincheck and Zaif coupled with the case of QuadrigaCX in Canada may be the reason behind the new rules Japan has in store.
Meanwhile, the latest rumored move only adds to many previous efforts made by the FSC as a regulatory body to bring some legal certainty to the cryptocurrency industry.
In December, the FSC replaced the term virtual currency with crypto-assets as a way to clarify questions on whether the new invention could serve as legal tender. Also in the same month, the Japan National Tax Association (NTA) announced plans to introduce new rules to reduce crypto tax evasion in the country.
More recently, Japanese regulators announced the introduction of limits on margin trading on crypto exchanges.