Japan's Financial Services Agency Pushes for Stronger User Protection
Japan is significantly tightening the rules for cryptocurrency exchanges, a move widely anticipated in the wake of numerous global hacks and exchange failures. Regulators are prioritizing stronger protections for everyday users, with new regulations poised to require crypto exchanges to maintain liability reserves to cover potential user losses.
According to a report from Nikkei, Japan’s Financial Services Agency (FSA) is preparing to implement fresh rules that will mandate crypto exchanges to hold liability reserves. The primary objective of this initiative is to ensure that exchanges can adequately compensate users for any losses incurred.
JAPAN FSA PLANS MANDATORY RESERVE FUNDS IN MAJOR CRYPTO OVERHAUL
– Japan’s Financial Services Agency (FSA) plans to require platforms to hold mandatory reserve funds to protect users from losses caused by hacks, fraud, or system failures.
A Push for Stronger Protection
– The… pic.twitter.com/dqvlmsrzXV
— BSCN (@BSCNews) November 25, 2025
This proposal originated from the Financial System Council, an advisory body that provides guidance to the FSA. A comprehensive report detailing the operational framework for these reserves is expected to be released this week. This regulatory push comes in response to several high-profile international exchange hacks, prompting Japanese regulators to proactively safeguard local users from similar risks.
Crypto Exchanges Must Prepare for New Reserve Fund Requirements
A central recommendation from the advisory council is that crypto exchanges must establish and maintain liability reserves specifically to compensate users. These forthcoming changes are part of a broader regulatory review aimed at enhancing the cryptocurrency landscape in Japan. Concurrently, the FSA is examining rules that could permit banks to hold previously restricted crypto assets, indicating that while Japan is adopting a cautious approach, it remains open to the development of the crypto sector.
🇯🇵 NEW: Japan’s Financial Services Agency will require crypto exchanges to hold liability reserves to compensate users for hacks or security breaches, per Nikkei report. pic.twitter.com/vR1v18sifK
— Cointelegraph (@Cointelegraph) November 25, 2025
According to data from the FSA in February, Japan has approximately 12 million registered crypto accounts. Considering the nation's population of about 123 million, this represents a substantial portion of active or potential users, underscoring the importance of establishing robust safety nets.
Japan's Expanding Stablecoin Ecosystem
The comprehensive overhaul of Japan's crypto regulations extends beyond exchange operations to encompass the growing stablecoin ecosystem. In October, the first yen-pegged stablecoin was launched by fintech company JPYC. This stablecoin is backed 1:1 by bank deposits and government bonds, following years of regulatory adjustments. Previously, Japan had prohibited non-banks from issuing stablecoins, but the FSA has since revised its stance, anticipating the arrival of the first fully approved yen stablecoin by 2026.
Japan’s first legally recognized yen stablecoin is JPYC.
And it’s powered by Avalanche. pic.twitter.com/Wxh9ryrlG9
— Avalanche🔺 (@avax) October 27, 2025
Major Japanese banks, including Mitsubishi UFJ, Sumitomo Mitsui Banking Corp., and Mizuho Bank, have already outlined plans to issue stablecoins through their shared platform, Progmat. Additionally, Monex Group is actively considering the development of a yen-supported token.
Conclusion: A Safer Crypto Environment
The directive for crypto exchanges to hold liability reserves sends a clear and strong message that user protection is a paramount concern in Japan's evolving digital asset landscape. Through the development of stablecoins and the refinement of banking regulations, Japan is actively fostering a safer and more mature cryptocurrency environment. This commitment to security is expected to be a crucial factor for millions of Japanese crypto users.