Bloomberg reported that Bitcoin dropped by 3.4%, while another cryptocurrency Ripple retreated 9.9% on Friday.
NEM is the tenth largest cryptocurrency by market value. The estimated losses make the hack of exchange Coincheck the biggest the virtual currency sector has ever experienced.
The slump was short-lived, however, with Japanese virtual currencies rallying on Monday despite concerns about the security around digital money.
“A lot of bad news had already kind of been filtered and hit the market,” Kay Van-Petersen, a Singapore-based global macro and crypto strategist at Saxo Capital Markets told Bloomberg. “It re-underlines the need for better security in the space, but this by no means, means a structural kind of negative, or killer to the development of the space.”
NEM
After the breach was discovered on Friday, Coincheck suspended trading. Around 260,000 customers are through to be affected.
According to Bloomberg, the hackers were able to seize such a large sum in part because Coincheck lacked basic security protocols. It kept customer assets in what’s known as a hot wallet, which is connected to external networks.
Exchanges generally use cold wallets, which aren’t connected to the outside world and are less vulnerable to hacks.
The firm has promised to reimburse nearly 90% of the money stolen, reports the BBC.
“We know where the funds were sent,” Coincheck’s chief operating officer Yusuke Otsuka told reporters at the Tokyo Stock Exchange on Friday. “We are tracing them and if we’re able to continue tracking, it may be possible to recover them.”
MtGox collapse
This is not the first time that Japan has experienced a massive digital currency hack.
In 2014, MtGox, formerly the world’s largest Bitcoin exchange, lost what it thought was 850,000 Bitcoins.
While 200,000 was later found in an old digital wallet, it led to the company’s collapse.
It now ranks as the second biggest cryptocurrency heist.
A licensing system was introduced in Japan to increase oversight of such firms in April 2017.
The hack comes as governments around the world are scrambling with how to deal with cryptocurrencies, with some proposing regulation and others looking to outright ban them.
The failure of the Japanese licensing system, however, could have a big influence on the direction taken by other governments.
