Japan’s Financial Services Agency (FSA) is preparing a new regulatory framework that would require domestic cryptocurrency exchanges to maintain dedicated liability reserves. According to recent reports from Nikkei Asia, the goal is to enhance consumer protection by ensuring exchanges can compensate users in the event of hacks, system failures, or other operational losses.
Under current law, Japanese exchanges must already store customer assets in cold wallets, but they are not obligated to maintain separate funds specifically earmarked for compensation. The FSA plans to close this gap and is expected to submit the proposal to parliament next year.
Stronger Safeguards Following High-Profile Breaches
The move comes as Japan continues to face high-impact security incidents. In 2024, DMM Bitcoin suffered a massive breach worth roughly $312 million, linked to a trading management partner. Events like this have fueled regulatory urgency and highlighted vulnerabilities in third-party service relationships.
Regulators are also advancing a new registration system for custodians and external service providers, with proposals expected to be submitted during the 2026 Diet session. This system would create clearer oversight of entities that support crypto platforms behind the scenes.
Japan Balances Tighter Rules With Pro-Crypto Reforms
Even as Japan tightens protections, it is simultaneously working to create a more crypto-friendly environment. The FSA is exploring a reclassification of digital assets under the Financial Instruments and Exchange Act, a shift that may modernize how crypto assets are treated within the country’s financial system.
Officials are also considering a flat 20% capital-gains tax on crypto, a significant reduction that could encourage wider adoption and investment. Major Japanese banks are testing yen-backed stablecoins, while major asset managers—including MUFG and Daiwa—are preparing to launch Japan’s first crypto investment trusts.
Overall, Japan appears poised to strengthen security while promoting innovation, signaling a maturing digital-asset landscape designed to protect users and support long-term growth.
