Japan Introduces New Liability Reserves for Crypto Exchanges
- Japan builds a fresh reserve model that shields crypto users from unauthorized losses.
- FSA plans stricter oversight for third-party crypto custodians and system providers.
- Wealth managers study new digital paths as the regulatory map gains structure.
Japan’s Financial Services Agency will introduce mandatory liability reserves for cryptocurrency exchanges to protect users. The reserves will enable fast compensation when digital assets are withdrawn from platforms due to unauthorized access or internal system failures. The move comes as regulators prepare new rules amid rising security concerns and recent domestic breaches.
A working group of the Financial System Council is finalizing a report on virtual currency regulations that includes the reserve mandate. The Financial Services Agency has received the group’s findings and plans to take action soon.
The agency accelerated the timeline after reports of internal system issues at Japan Digital Design Inc., which then sought support from external security firms, including Mitsui Knowledge Industry Co.
The Financial Services Agency said the decision also follows hacking incidents at overseas exchanges. A major incident in Japan during 2024 further fueled concerns. A breach at a third-party provider caused one of the largest platforms in the country to lose hundreds of millions of dollars, prompting questions about the safety of outsourced systems and operational risk.
New Liability Rules Mark Major Regulatory Reform
The liability reserve rule has been the biggest digital asset regulatory transformation in Japan for the last two years. According to this regulation, exchanges have to keep a distinct fund that protects customers from the loss of unauthorized withdrawals. Customers can get their money back quickly because of the reserve without any operational delays. It also prevents customers from absorbing losses due to hacks or fraudulent transfers.
Recent domestic breaches added urgency. DMM Bitcoin suffered an attack in 2024 after a hacker entered the exchange through software provider Ginco, which oversaw part of its trading operations. The incident caused losses of about $312 million and intensified calls for stronger protective measures.
The Financial Services Agency is planning to introduce regulations for third-party crypto custodians and trading partners. Thus, these companies will have to get registered with the regulators before they can operate in the local exchange market. It is anticipated that this scheme will be presented in the 2026 regular Diet session.
The regulatory shift could affect crypto, as policymakers are considering treating digital assets as financial products. If adopted, this change would apply a uniform 20% capital gains tax, similar to the rate for stocks and bonds.
Related: Japan Targets Crypto Comeback With Major 20% Tax Switch
Japan Pushes Forward on Stablecoin and Investment Reforms
Japan is also advancing its regulations for stablecoins. Regulators approved a joint yen-stablecoin project involving three major banks. This initiative signals the government’s long-term view that fiat-pegged stablecoins will integrate into the national financial system.
Local financial institutions are already planning new products. According to a Monday Nikkei report, six of Japan’s largest wealth managers, including Mitsubishi UFJ Asset Management and Daiwa Asset Management, are preparing the country’s first crypto investment trusts. These developments raise a central question for the sector: will stronger protections encourage broader adoption among cautious investors?
Asset managers expect the regulatory clarity to support new investment vehicles. They are exploring tools that may expand trading activity and foster competition within the domestic market.
The liability reserve mandate marks Japan’s ongoing effort to develop a secure regulatory structure that supports investor confidence. The framework aims to create oversight across banking, securities, and emerging digital assets while preserving market stability.
