In April, Monex, Japan’s third-largest online brokerage, completed a $32 million acquisition of Coincheck and this reportedly led to an improvement in the exchange's governance. Photo: Reuters/Toru Hanai

When news broke that Japanese crypto-currency exchange Coincheck had been hacked, many predicted a market crash in the most crypto-friendly country in the world.

Neither happened and the exchange was thrown a lifeline by Tokyo-based financial services company Monex Group.

Following the theft of more than $530 million of digital Nem tokens in January, many speculated the company would collapse, creating panic across already volatile crypto markets.

As with any security breach or hack, the news is never good, but crypto-currency markets were already extremely bearish at the end of January following an all-time high for many digital coins. Coincheck came through on its promise to compensate its customers from its own funds and 260,000 users who lost Nem tokens in the hack were refunded 46.3 billion yen ($US424 million).

Last week online brokerage firm Monex completed the purchase of Coincheck for 3.6 billion yen (about $33 million). After the deal was complete the company released earnings figures for the exchange before the hack. As Asia Times reported on Friday, Coincheck Inc earned 53.2 billion yen (approximately $490 million) in the 10 months from April 2017 through January when the hack happened. In comparison, Japan Exchange Group, which owns the Tokyo Stock Exchange and Osaka Exchange, earned 66.1 billion yen (just over $600 million) for all of 2017.

It is clearly evident that operating a crypto-currency exchange is a highly lucrative and profitable business in Japan. Monex had considered opening its own exchange, but came to the conclusion that buying one with an existing infrastructure and client base would a smarter move.

Security is a top priority as Japan refines its regulatory framework and the Financial Services Agency (FSA) twice issued business improvement orders to Coincheck and even raided its offices. Under Monex ownership, however, the exchange is likely to be officially registered with the government, strengthening its position in Japan’s competitive crypto market.

Monex has been very optimistic about the future and its latest acquisition, and in a press release the company announced: “Coincheck is in the process of enhancing its governance and internal control after receiving the business improvement order from the Kanto Local Finance Bureau concerning the theft of cryptocurrency, NEM, as a result of unauthorized access to its system on January 26, 2018. We aim to build a secured business environment for customers by fully backing up Coincheck’s enhancement process. We will support Coincheck to provide [a] secure environment to customers and to grow sustainably as a socially valuable cryptocurrency exchanger.”

The FSA continues to investigate exchanges in Japan to ensure compliance with regulations and a growing number are joining the queue to be officially registered. Monex could be on to a very good thing once Coincheck becomes an approved government registered digital currency exchange. Its shares already jumped 20% after the announcement, indicating its shareholders are supportive of its move into crypto space.

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