Not long after Coinbase announced its entry into the Japanese market with its Mitsubishi UFJ Financial Group partnership, news broke on Thursday of a hefty hack on Japan’s Liquid exchange.

It’s all happening in the Land of the Rising Sun for crypto exchanges – good and bad.

Let’s look at the hack first, as this is one of the biggest on a centralised exchange this year, and has potential to affect the crypto market a little more at this stage.

Liquid, a regulated exchange in Japan since 2014, revealed today via Twitter that it has been hacked for an estimated $US84 million.

Stockhead originally reported that the exchange’s online-based hot wallets, which Liquid calls “warm wallets”, were the infiltration target – as per one of Liquid’s first tweets about the exploit (see below).

However, it’s since come to our attention that it was actually a Multi-Party Computation (MPC) wallet that was compromised. According to a Liquid blog update, this wallet is “used for warehousing and delivery management of cryptographic assets” by the exchange’s Singapore subsidiary Quoine.

This would be an eye-opening revelation for the hundreds of crypto firms, including exchanges and custodians, relying on MPC technology for securing digital assets.

Liquid today shared the hacker’s crypto addresses, which, according to reports, have benefitted from more than 107 BTC, 9 million Tron (TRX), 11 million XRP, and about $60 million worth of ETH and ERC-20 tokens.

Users of the borrowing, lending and yield-earning platform Celsius, meanwhile, might’ve been a bit jumpy at the exploit news. And this is because Celsius is partnered with Liquid, offering the exchange’s user base a compounding return on crypto purchases.

Celsius has, however, scotched fears surrounding the idea that any Celsius deposits connected with Liquid could have been affected.


This isn’t the first time Liquid has been compromised. In November 2020, hackers were able to access users’ personal information held by the exchange, which reportedly included names, addresses and passwords.

The hack is a big one, for sure, but still nowhere near as large as the recent Poly Network DeFi hack of more than $610 million, which is still a bizarre, ongoing story of returned and unreturned funds and “white hat” security job offers.

And it isn’t the biggest hack on a Japanese exchange, either. Famously, the Mt. Gox attack of 2014 saw 850,000 Bitcoin stolen (US$450 million worth at the time), sending the industry into shock. Then there was the US$560 million Coincheck hack of 2018.

The lesson here for regular crypto investors is pretty simple. Don’t keep your crypto sitting on centralised exchanges any longer than is absolutely necessary.


Coinbase enters Japan

Speaking of centralised crypto exchanges, Coinbase announced on Wednesday via a blog post and Twitter that it will be rolling its already far-reaching global operations into Japan.

Some might see this a s a long-time coming, considering Japan is one of the largest crypto markets by trading volume in the world.

Coinbase is partnering with the Mitsubishi UFJ Financial Group – one of the largest banks in Japan with 40 million customers. And, according to the announcement, the collaboration will give Japanese crypto investors access to Coinbase’s platforms to begin trading immediately by offering MUFG Quick Deposit “from day one”.

“Today’s launch is just the beginning,” reads the blog announcement. “We will be launching retail products first, including a suite of five top assets based on trading volume, and will add more assets and products in the coming months.

Japan’s cryptocurrency landscape has a general blanket of regulatory compliance, which perhaps partly came about from all the scrutiny and publicity involved with the 2014 Mt. Gox exploit.

Coinbase is keen to prove itself in such a strongly regulated environment and plans to be the most trusted exchange in the crypto-loving nation.

“In line with our global strategy, we will aim to be the easiest to use and most trusted exchange in Japan that’s fully compliant with local regulations… That’s why we are also excited to announce our partnership with MUFG,” reads the Coinbase press release.