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On 5th February, South Korea's National Intelligence Service (NIS) told the National Assembly that North Korea stole virtual currency worth billions of won (around $238 million) from the country by means of cyber attacks. The service also said that North Korea hackers were responsible for the approximately $500 million loss in NEM coins late last year, South Korean media reported.

NIS pointed out that the cyber attacks from the North poses threat to the country which is "a serious issue". According to NIS's analysis, hackers sent emails to trading platforms and their customers or posted job adverts under the name of renowned exchanges in order to steal private information, such as personal identification numbers.

"North Korea has completely penetrated South Korea's crypto trading network and stole (cryptocurrency) worth billions of won," members of the intelligence service spoke through Yonhap News. NIS didn't disclose which exchanges were hacked, but several exchanges reported on large-scale hacker attacks last year. This year, the Service said, South Korean authorities have been working with overseas regulators and have published policies on fighting international cyber crimes, such as North Korea's cryptocurrency theft and international cyber attacks.

Japan's top government spokesman, Chief Cabinet Secretary Yoshihide Suga said on Tuesday morning (6th February), "We're working hard to gather and analyse information on North Korea's cyber attack", and "we acknowledge how we deal with cyber attack is an important issue for our nation's security, crisis management and the economic growth. We would like to respond in cooperation with the international community with a sense of urgency." But he declined further comment.

Taro Aso: the raids would expand

Coincheck announced on 28th January that it will use its own funds to reimburse customers who lost money in the NEM theft (See ChainDD's article: Coincheck to use its own money to cover users' $423 million losses), but it remains a question whether it owns an equivalent amount of JPY 46 billion. On 2th February, Japan's Financial Services Agency (FSA) conducted a spot inspection on Coincheck. The company was ordered to improve its operations in compliance with liquidation regulations and submit a report on the hack investigation and measures for strengthening governance structure by 13th February.

Speaking to reporters after a cabinet meeting on 3rd February, Japanese Finance Minister Taro Aso asserted that investigations into Coincheck were being conducted, and commented that the pending Coincheck report "must ensure that the assets of Coincheck users are sufficiently protected."

On the same matter, Aso said again at the House budget panel on 5th February, "first of all the situation (Coincheck's asset review) must be inspected and the raids would expand."

Coincheck: facing a grim prospect

On 3rd February, users' money (in yen) stored on Coincheck were transferred to a FSA special account which is offline to improve security.

Such being the case, if FSA doesn't grant Coincheck a license, that will be its admission of inadequate supervision. But even if Coincheck is approved and licensed, the future still looks grim for the Tokyo-based exchange.

Coincheck has turned off its withdrawal and payment functions, but it's easy to imagine that users will immediately draw their money out of the platform once withdrawal is on. Therefore, it is questionable whether users will continue to have faith in and trade on Coincheck even when it's licensed.

On 3rd February, NEM owners gathered for a meeting in Tokyo to discuss filing a lawsuit against the company. A programmer (male, 28) living in Setagaya, Tokyo who stored virtual currency worth 1 million yen on Coincheck said, "Although there is a reimbursement announcement, I am angry because there's no sign of refund or withdrawal of deposits after such a long time. If the FSA inspection is reliable, we hope we can at least be told whether there would be a refund or not."

The crypto community starts to feel the aftershock of the incident. Low-cost airline LLC once again postponed launching digital currency payment services after it announced last May that such services would roll out at the end of last December. In December, however, the company said the new form of payment would not be introduced till March 2018. "The timing is still under negotiation,"  LLC says, "which is necessary considering the current circumstances (of fluctuations in prices)."

LLC's planned introduction of bitcoin as a payment method may become an empty promise, some foreign media commented.

In fact, there have been more and more speculations in virtual currencies while other services are sluggish. BitFlyer, Japan's largest virtual currency exchange, signed a cooperation agreement with BicCamera regarding payment in Bitcoin last April. In bitFlyer's system, the transaction is calculated based on real-time exchange rate of the coin, so that the retailer doesn't have to bear the risk of price volatility.

BicCamera piloted bitcoin payment in two of its brick-and-mortar stores, one in Higashiguchi, Shinjuku and the other in Yurakucho, before the service was introduced to 59 stores. Initially, payments made in bitcoin only accounted for 0.1% of the total revenue. However, statistics revealed that the number tripled in December with a monthly turnover of JPY300, 000 (RMB18, 000 / USD2729).

South Korea: clouded by the aftermath

Not only Japan but also South Korea is faced with the backwash of the NEM theft. Korean media repeatedly reported suicides of young people that are linked to the cryptocurrency incident. For instance, a student studying in a prestigious university in Seoul committed suicide back at his home in Busan after his investment of more than 200 million won in virtual currency plummeted at the end of last year, Yonhap News reported on 1st February.

The anonymity of virtual currency could make a hotbed for money laundering. Therefore, South Korea officially launched a real-name trading system on 30th January. (See ChainDD's article: Bitcoin price plunges 60% as South Korea launches a real-name trading system). The announcement was followed by a drastic 60% plunge of the total value of virtual currency in South Korea.

This, coupled with a series of cryptocurrency thefts on several exchanges last year, prompts the South Korean government to take a cautious stance.

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   Translated by JoyceChan at TMTpost.