Japan FSA crypto liability reserves: 2026 rules
|New reserve mandate
Japan's Financial Services Agency (FSA) will force every licensed crypto exchange to hold dedicated liability reserves. The funds will pay out users immediately in case of hacks, fraud, operational errors, or unauthorized withdrawals. Reserve size will be calculated from each platform’s trading volume and past incident record. Approved insurance policies can count toward the requirement, reducing the cash burden on operators.
Legislative timeline
The FSA will submit the amendment to parliament in the 2026 ordinary session. It expands the Payment Services Act and layers on top of existing cold-storage rules. A Financial System Council working group is currently finalising the exact formulas and enforcement mechanisms before the bill is drafted.
Driven by past failures
The reform directly responds to two of Japan’s largest exchange collapses. Mt. Gox lost 850,000 BTC in 2014, and DMM Bitcoin was drained of $305 million (48.2 billion yen) in May 2024. Regulators want to eliminate situations where companies cannot compensate victims without external bailouts.
Part of wider overhaul
The 2026 package is expected to reclassify cryptocurrencies as financial instruments under the Financial Instruments and Exchange Act. If passed, exchanges will face insider-trading bans, stricter custody audits, and enhanced disclosure obligations — bringing crypto rules closer to those of traditional securities firms.
Market impact
Smaller exchanges may face higher relative costs, while larger players like bitFlyer and Coincheck already hold voluntary reserves or insurance. The rules reinforce Japan’s reputation as one of the most regulated yet innovation-friendly crypto jurisdictions globally.
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