Key Takeaways
When will the proposal be submitted?
The legislation is expected to be presented to parliament in 2026.
Don’t exchanges protect all customers’ money?
They must store most customer assets in cold wallets, but they are not required to maintain financial reserves to cover losses, something the new rules aim to solve.
Japan is stepping up efforts to protect its growing base of crypto investors.
Japan’s new crypto rules
The country’s Financial Services Agency (FSA) is preparing to submit new rules that will require crypto exchanges to maintain liability reserves, a safeguard designed to compensate users in the event of hacks or security breaches.
Japanese crypto regulations already require exchanges to keep most customer assets in cold wallets, a practice intended to reduce exposure to online attacks.
But even with these safeguards in place, platforms are currently not required to maintain special reserves for potential losses makes users vulnerable if a power plant experiences a breach or operational outage.
To bridge this gap, the FSA plans to bring the legislation to parliament in 2026, signaling an attempt to bring crypto supervision closer to the rules already applicable to traditional markets, according to a recent study. Nikkei report.
How will it help Japan’s crypto ecosystem?
Under the current framework for traditional securities, brokers must maintain financial reserves to cover losses due to unfair practices. These practices include system errors or incorrect orders that can lead to significant financial damage.
Major securities firms in the country typically maintain reserves ranging from ¥2 billion to ¥40 billion. This amount, roughly $12.7 million to $255 million, depends on trading activity and overall risk exposure.
The FSA plans to introduce new reserve requirements based on existing standards for traditional securities. They will also consider previous cases of crypto leaks. Exchanges may have the option of using insurance to ease the financial burden.
Furthermore, the proposed framework aims to significantly strengthen insolvency protection measures. This includes strengthening strict asset segregation rules and streamlining the process for returning customer money if an exchange collapses.
Japan’s push for stricter oversight comes after a series of major security breaches that continue to haunt the crypto sector. The infamous one, for example The Mount Gox collapse, which occurred in 2014, is still impacting the crypto sector, with refunds not beginning until 2024.
Additionally, DMM Bitcoin lost 4,502 BTC in a North Korea-linked hack, while SBI Crypto saw $21 million siphoned off and laundered through Tornado Cash.
These repeated incidents have underscored the need for stronger consumer protections, making the proposed reserve requirements a crucial step toward restoring confidence in Japan’s digital asset ecosystem.
Japan’s crypto adoption rate and more
Despite the hacks and collapses, Japanese investors are showing their commitment to crypto. Recent data from Chain analysis revealed a 120% increase in value received across the chain in the year leading up to June 2025.
This growth is the strongest among the major markets in the Asia-Pacific region. Factors contributing to this increase include tax reforms, new stablecoin regulations and clearer recognition of investments.
Domestic trading also reflects this shift, with XRP purchases in JPY reaching $21.7 billion, easily surpassing Bitcoin. [BTC] and Cardano [ADA].