Japan Plans Tough New Rules For Crypto Exchanges: What Liability...

Japan is in the process of introducing significant changes to cryptocurrency regulation following renewed attention to Mt. Gox-related repayment activity in 2024.

The Financial Services Agency (FSA) plans to introduce new rules requiring cryptocurrency exchanges to maintain special “liability reserves” to protect customers if their assets are lost due to hacks or unauthorized transfers. The measures aim to bring the cryptocurrency sector closer to the strict standards applied to traditional financial institutions in Japan, one of the world’s most heavily regulated markets.

As of Dec. 9, 2025, under the Payment Services Act, registered cryptocurrency exchanges in Japan must comply with strict requirements. These include asset custody, accounting, separation of client funds, Anti-Money-Laundering (AML) controls and cold storage rules. However, there is still no legal obligation for exchanges to hold dedicated funds to compensate customers after a hack or unauthorized outflow. The FSA and its advisory Financial System Council have concluded that this gap in protection needs to be closed.

Japan has a history of major failures and consumer losses in the crypto industry. The 2014 hack of Mt. Gox, in which over 740,000 Bitcoin (BTC) was stolen, resulted in the exchange’s bankruptcy and a repayment process that is still ongoing. In May 2024, the Japanese exchange DMM Bitcoin lost 4,502.9 BTC due to a major theft. These incidents showed that customers remain vulnerable even with strong safeguards such as mandatory cold wallet storage.

The new rules will require exchanges to maintain dedicated funds to compensate customers in the event of security breaches.

According to a report in The Nikkei, the draft legislation will require all registered cryptocurrency exchanges to hold liability reserves. These reserves will be used to repay customers if assets are lost through unauthorized transfers. The requirement will apply even to funds kept in cold wallets, ending the previous assumption that offline storage alone provides sufficient protection.

The FSA plans to base the size of these reserves on standards already used for securities firms in Japan. Traditional securities companies must maintain reserves ranging from 2 billion to 40 billion Japanese yen, depending on their size, risk profile and activity level.

To reduce the burden on smaller operators, the FSA is considering allowing exchanges to meet some or all reserve requirements through approved insurance po

Source: CoinTelegraph