TOKYO (Reuters) – Japan’s Financial regulator will this week launch on-site inspections of several cryptocurrency exchange operators potentially vulnerable to cyberattacks and may expand its inspections, a person with direct knowledge of the matter said on Thursday .

The financial services Agency (FSA) last Friday swooped on Coincheck Inc for a surprise inspection of its systems after the Tokyo-based operator had $ 530 million in digital money stolen by hackers.

The theft exposed a vulnerability in the trading of an asset that politicians are trying to regulate. Japan last year became the first country regulated by exchanges at the national level.

After the theft in late January, the FSA said it would also investigate the other 31 cryptocurrency exchanges in Japan for security gaps. He ordered them to submit a report on their systemic risks of managing and storing cryptocurrencies, and said he would monitor on-site verification if he found vulnerabilities.

The FSA decided to inspect the exchanges after reviewing their reports, the source said, adding that the Agency’s inspections could expand as it analyzes other reports.

The FSA declined to comment.

The Agency has issued an order to improve Coincheck’s business, while Tokyo police, as well as authorities in several countries, are investigating the case.

The explosive rise in the value of digital coins last year and the flood of new retail investors attracted to the market have rattled global regulators nervous about the sector being used mostly for speculation. Officials said cryptocurrencies are being used by criminals to launder money.

Reporting by Takahiko WADA and Chang-Ran Kim; writing by Thomas Wilson editing by Richard Pullin

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