Japanese Regulator Moves To Force Crypto Exchanges To Hold Liability Reserves
Japan drops tough new security rules on crypto exchanges
Japan’s top financial watchdog is preparing to tighten the rules for cryptocurrency exchanges, pushing them to hold dedicated liability reserves to protect customers from hacks and other unexpected losses. The Financial Services Agency (FSA) is reportedly revising its requirements to ensure platforms can quickly compensate users if security breaches or operational failures occur, after a string of high-profile incidents at global exchanges.
A forthcoming report from the Financial System Council, an advisory body to the FSA, is expected to recommend that registered crypto firms maintain specific reserve funds earmarked for liability coverage. This step would further formalize Japan’s already strict approach to digital asset oversight, while reinforcing consumer protection in a market with roughly 12 million registered crypto accounts out of a national population of about 123 million.
The new reserve rules come as the FSA also reviews regulations that could allow domestic banks to purchase and hold crypto assets, signaling a cautious but growing institutional engagement with digital currencies.
Alongside tighter exchange rules, Japan’s yen-pegged stablecoin ecosystem is starting to take shape. Tokyo-based fintech firm JPYC launched a yen-backed stablecoin in October, claiming full one-to-one backing with bank deposits and Japanese government bonds. This development follows a 2022 regulatory change that restricted stablecoin issuance to licensed banks and certain approved institutions, shutting non-bank issuers out of the market.
Despite those limits, regulators indicated in August that they may approve the first fully regulated yen-backed token by 2026. Major financial groups including Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corp, and Mizuho Bank have already launched Progmat, a shared platform for issuing stablecoins, and are reportedly exploring their own tokens. Monex Group is also considering a yen-pegged stablecoin, highlighting Japan’s strategy of pairing strict consumer safeguards with controlled innovation in digital assets.
