Japanese authorities intend to require cryptocurrency exchanges to create reserves to cover customer losses - Latest news

Japan's Financial Services Agency (FSA) plans to introduce legislative amendments that will take effect in 2026. These changes will require crypto exchanges operating in the country to create special reserves to cover potential customer losses. This initiative is aimed at strengthening investor protection and increasing trust in cryptocurrency platforms.

New Requirements for Crypto Exchanges

Japanese authorities intend to impose requirements for crypto platforms similar to those applicable to securities firms. These firms are required to set aside funds to compensate users in the event of hacks or fraudulent transactions. The reserve amounts for crypto exchanges will range from 2 billion to 40 billion yen (approximately $12.7 million to $255.2 million), depending on trading volume and the presence of security incidents.

The FSA will also offer exchanges the option to purchase insurance policies, which will reduce the financial burden of maintaining large reserves. This innovation should help exchanges guarantee the return of assets to clients in the event of an operator's bankruptcy. Furthermore, crypto exchanges will be required to segregate user assets from the company's own assets. If the platform's team no longer controls it, a court-appointed lawyer or asset manager will be responsible for distributing user assets.

Lessons from the Past: Security Incidents

Currently, crypto exchanges are required to store client assets only in cold wallets, which should reduce security risks. However, as experience shows, these measures are insufficient to prevent theft. In 2024, the Japanese crypto exchange DMM Bitcoin was hacked, allowing attackers to exploit a third-party vulnerability and steal over 4,500 bitcoins from the platform's wallets. To reimburse clients for losses, the exchange had to raise hundreds of millions of dollars through emergency loans and asset sales, leading to lengthy delays in the return of stolen funds.

Expected Results and Market Impact

According to the FSA, tightening requirements for cryptocurrency trading platforms should prevent similar incidents in the future and enhance investor protection. The introduction of mandatory reserves and insurance policies will create a safer environment for users, which, in turn, could contribute to increased interest in cryptocurrencies and trading volumes.

In conclusion

Thus, the new measures proposed by Japanese authorities could be an important step toward creating a more stable and secure cryptocurrency market. In an environment of increasing competition and the need to protect investor rights, such initiatives could have a significant impact on the future of crypto exchanges in Japan and beyond.