Bitcoins for free? Japanese cryptocurrency exchange lands in hot water again

TOKYO (Reuters) – A blunder at a Japanese cryptocurrency exchange let investors briefly buy bitcoins for free – though none were able to profit from the mistake.

Zaif, a government-registered exchange run by Osaka-based Tech Bureau Corp, said on Tuesday that a system glitch had let seven customers buy bitcoin with no yen value during a 20-minute window last week.

The exchange voided the trades after discovering the error, which happened on Feb. 16 – though it was still trying to resolve the issue with one customer who tried to transfer the knock-down bitcoins from the exchange, a spokesman told Reuters.

Zaif’s operator had already faced checks after last month’s theft of $530 million in digital money from Coincheck Inc, with regulators fearing its systems were at risk from cyber-attacks.

The latest flub could draw further attention to security and systems at cryptocurrency exchanges, which were already under scrutiny in the wake of the Coincheck heist. The theft also drew into question Japan’s system of overseeing exchanges.

Zaif is one of 16 exchanges registered with the government, which last year allowed a further 16 – including Coincheck – to continue operating pending full registration.

The registered exchanges will form a self-regulatory body from April, sources have told Reuters. They had originally planned to merge two existing industry bodies representing both registered and unregistered exchanges.

The body will set out rules on issues like exchange security and advertising, and will lay out penalties for members who don’t follow the policies, the Nikkei business daily reported on Wednesday.

Japan last year rolled out the world’s first system to oversee cryptocurrency exchanges, in a bid to protect customers and stamp out illegal uses of cryptocurrencies as it sought to nurture a young and promising sector.

The regulator opted for relatively loose rules to help nurture the industry, mostly populated by start-ups. The Coincheck heist exposed flaws in the system, and – for some experts – raised questions over Japan’s dash to regulate the industry amid crackdowns by countries from China to India.

Bitcoin surged more than 1,300 percent last year but lost about half its value at one point this year as more governments and central banks signaled possible regulatory crackdowns.