Japan’s Financial Services Agency (FSA) announced on the 25th that it will require domestic cryptocurrency exchanges to maintain dedicated compensation reserves to cover potential customer asset losses. The policy aims to strengthen consumer protection in the event of cyberattacks, system failures, or other unexpected disruptions.
?? NEW: Japan's Financial Services Agency will require crypto exchanges to hold liability reserves to compensate users for hacks or security breaches, per Nikkei report. pic.twitter.com/vR1v18sifK
— Cointelegraph (@Cointelegraph) November 25, 2025
Under the new framework, exchanges will no longer be exempt from maintaining compensation reserves even when customer assets are stored in cold wallets, a method previously considered secure enough to avoid such requirements.
Toward Stricter, Brokerage-Level Regulations
The upcoming rules are expected to impose capital standards similar to those applied to banks and securities firms, marking a significant tightening of Japan’s regulatory environment for digital asset companies.
Japan’s crypto market continues to expand rapidly, with approximately 12 million accounts opened as of February 2025. Interest remains especially strong for major cryptocurrencies such as Bitcoin (BTC), which continue to lead trading activity.
The shift in regulatory stance follows the collapse of major overseas exchange FTX in 2022, which sparked renewed global debate over risk management and investor protection within crypto markets. Regulatory bodies worldwide, including those in the EU and Hong Kong, are likewise moving toward stricter oversight and safety frameworks.
The FSA aims to ensure that Japan’s growing crypto user base is protected by robust mechanisms capable of responding to worst-case scenarios.
Compensation Fund Size and System Outlook
The required size of the compensation reserves will be determined based on each exchange’s trading volume, security incident history, and overall risk profile. For comparison, traditional securities companies in Japan must secure reserves ranging from about USD 13 million to USD 260 million.
The FSA is also considering allowing part of the mandatory reserves to be covered through insurance policies, signaling a flexible regulatory design.
In addition to reserve requirements, the new system would reinforce security beyond cold wallet storage and maintain the existing rules on separating company assets from customer assets.
A formal bill introducing these regulations is expected to be submitted to Japan’s ordinary Diet session in 2026.
If enacted, the new framework would position Japan as one of the world’s most secure and investor-friendly cryptocurrency markets, backed by some of the highest standards for user protection.
