Japan is preparing yet another major tightening of its digital asset rulebook, with the Financial Services Agency (FSA) planning to require crypto exchanges to set aside liability reserves to compensate clients in the event of hacks, operational failures or bankruptcies, according to reporting by Nikkei.
The proposal marks a shift in how Japan views the risks associated with storing digital assets. Exchanges are already required to store customer crypto in cold wallets – a measure meant to reduce the risk of theft because the assets are kept offline.
However, under current law, companies have no obligation to hold reserve funds if losses occur despite these safeguards. Regulators now see this gap as unacceptable, especially after repeated high-profile breaches.
The FSA aims to submit legislation to parliament in 2026. If passed, the exchanges would have to build reserve balances similar to those maintained by traditional securities firms, which typically set aside between ¥2 billion and ¥40 billion depending on trading volume.
These benchmarks, together with the history of crypto asset leaks, will guide the FSA in determining appropriate thresholds for digital asset platforms.
To ease the financial burden, the agency is considering allowing exchanges to meet part of the requirement through insurance. This approach mirrors policies in the EU and Hong Kong, both of which have introduced capital and insurance mandates for crypto platforms following their own rise in security incidents.
Japan’s painful history of crypto hacks
Japan’s shift is informed by a painful track record. In May 2024, DMM Bitcoin lost ¥48.2 billion in bitcoin – one of the largest exchange breaches in the country since Mt. Gox. In February 2025, Bybit lost around $1.46 billion in a global hack.
These events renewed questions about whether cold wallet regulations alone are enough, especially as exchanges increasingly outsource technology and operational functions to outside vendors.
The reforms go beyond reserves. The Danish FSA wants a legal framework that ensures that customer assets can be quickly returned if an exchange collapses or loses management control.
That means stricter asset segregation and clearer authority for court-appointed trustees to return money directly to users.
Regulators are also weighing a broader reclassification of cryptoassets under the Financial Instruments and Exchange Act, reflecting their evolution from payment tools to speculative investment products. Such a shift would trigger bans on insider trading, enhanced disclosure rules and stricter custody audits — effectively pulling crypto closer to the standards applied by securities firms.
Japan is also moving in parallel on adjacent fronts. The FSA is considering a registration system for third-party custodians and technology providers, strengthening oversight of the wider ecosystem that supports exchanges.
Meanwhile, domestic financial institutions continue to deepen their involvement: JPYC recently launched what it calls the world’s first fully redeemable yen-pegged stablecoin, and major asset managers are preparing the country’s first crypto-based mutual funds.
Overall, the planned reserve requirement and the broader regulatory review signal Japan’s intent to strengthen its crypto market while encouraging institutional participation.
Japan and lower crypto taxes
Earlier this year, Japan’s Financial Services Agency (FSA) finalized a major plan to reclassify 105 cryptocurrencies – including bitcoin – as financial products under the Financial Instruments and Exchange Act. The shift would impose the same disclosure, reporting and market monitoring rules that apply to traditional securities.
Exchanges would have to publish detailed data about each token’s issuer, blockchain design and volatility, while new insider trading rules would prevent issuers and exchange managers from trading on non-public information such as upcoming listings or bankruptcies. The amendments are scheduled for submission during the 2026 Diet session.
The Danish Financial Supervisory Authority is also pushing for a comprehensive tax audit. Today’s crypto profits are taxed as “miscellaneous income” at rates of up to 55%, but the bureau wants a flat 20% rate to match stocks. The change may come in 2026 and will apply to individuals and institutions. The moves come as Japan accelerates its Web3 push, including reconsidering rules restricting banks from holding or offering crypto.