Japan Moves to Protect Users With Mandatory Refund-Ready Reserves for Crypto Platforms

Key Takeaways

• Japan’s FSA plans to require crypto exchanges to maintain mandatory reserve funds to cover customer losses.

• The move aims to ensure rapid reimbursement in hacks, unauthorized access cases, or other emergencies.

• The proposal is expected to appear in an upcoming Financial System Council report, with legislation targeted for 2026.

Japan is preparing to tighten its crypto safeguards in one of the most significant policy shifts since the Mt. Gox collapse.

As the industry grows and crypto trading becomes mainstream nationwide, regulators aim to ensure that exchanges can compensate customers quickly when things go wrong.

The Financial Services Agency (FSA) is now proposing a new rule that would require crypto platforms to maintain a dedicated reserve fund — a financial buffer set aside for emergencies, such as hacks, system breaches, or sudden asset outflows.

The idea mirrors similar protections in traditional finance and reflects Japan’s growing seriousness about crypto infrastructure.

Japan Moves to Make Exchange Reserve Funds Mandatory

According to reporting from the Nikkei, the FSA intends to mandate these reserve funds as part of an upcoming reform package.

The proposal will be included in the Financial System Council’s next report, which is being finalized by a working group that advises the Prime Minister on financial system legislation.

The move follows a string of high-profile security failures that rattled public confidence over the years, from the historic Mt. Gox implosion to the ¥48.2 billion DMM Bitcoin theft and the $21 million security incident affecting SBI Crypto addresses, which investigators believe may have ties to North Korean groups.

Under the plan, crypto exchanges in Japan would be required to maintain enough capital to reimburse customers immediately, without depending on emergency loans or government intervention.

In practice, the reserve fund would function like an insurance pool: insulated, ring-fenced, and instantly deployable when incidents occur.

How Much Will Exchanges Be Required to Hold?

The exact reserve ratio has not yet been finalized, but the FSA is modeling its approach on existing rules for traditional financial institutions.

Brokerages in Japan typically maintain liability reserves ranging from 2 billion to 40 billion yen (roughly $12.7 million to $255 million), depending on business size and risk exposure.

Crypto exchanges in Japan may face a comparable structure, adjusting reserve amounts based on trading volumes, customer assets, and operational risk.

Additionally, a portion of customer assets must be stored domestically to reduce exposure to foreign jurisdiction risks or illicit outflows.

While the mandate will likely increase operating costs for exchanges, regulators argue that the added protections will build long-term confidence — particularly for retail investors who suffered most during past collapses.

Part of Japan’s Broader Overhaul of Digital-Asset Rules

The reserve-fund mandate arrives alongside a broader overhaul of Japan’s digital-asset regulations.

Recent changes include:

• Updates to the Payment Services Act, effective June 2025

• The removal of the cold-wallet storage exemption

• New allowances permitting banks to hold certain crypto assets

• Strengthened AML and reporting rules through the JVCEA

The Financial System Council is expected to release a full set of recommendations by late November 2025.

The FSA is preparing to introduce a bill to parliament during the 2026 legislative session, with implementation likely to begin later that year.

If enacted, exchanges will have a transitional period to build up their reserve funds before full compliance is required.

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