Catenaa, Wednesday, November 26, 2025-Japan’s Financial Services Agency plans to mandate that crypto exchanges maintain liability reserves to cover customer losses from hacks and security breaches, ending the current exemption for cold wallets. Legislation is expected to be submitted to parliament in 2026.
The proposed rules would mirror reserve requirements for traditional securities firms, which range from $12.7 million to $255 million depending on trading volume. Exchanges would also be required to establish formal procedures for asset returns in bankruptcy, including involvement of court-appointed administrators.
The move comes after multiple high-profile breaches, including last year’s DMM Bitcoin hack, which saw 4,502 BTC stolen via a compromised wallet provider, and a recent $21 million theft from SBI Crypto addresses. Japan’s crypto sector continues to recover from the 2014 Mt. Gox collapse, where 850,000 BTC were stolen, with repayments ongoing through 2026.
Regulators are also considering rules for firms providing wallet-management systems, reflecting concerns that outsourced software has become a critical vulnerability. To reduce the financial burden on exchanges, the FSA may allow insurance coverage as an alternative to full cash reserves.
Experts say liability reserves could restore user confidence by functioning similarly to insurance in traditional finance but warned that higher capital requirements may increase operational costs for exchanges. Blockchain analytics firm Chainalysis noted that Asia-Pacific, including Japan, ranks second globally in crypto theft incidents, highlighting the need for stricter safeguards.
