Japan intends to require digital currency trading platforms to maintain designated reserves to compensate customers for any losses, in a new attempt to protect investors from hacks and operational errors in one of the world’s most regulated digital asset markets.
The Financial Services Authority of Japan (FSA) is considering implementing legal changes that will require platforms to create reserves to compensate users in the event of hacks or other incidents leading to loss of funds, the Nikkei newspaper reported on Tuesday.
The authority also aims to submit a bill to Parliament in 2026, which plans to expand the scope of a long-term framework applied to traditional stock markets to include the digital currency market, as Japan currently requires platforms to store customers’ currencies primarily in cold wallets that are not connected to the internet, as they are considered more secure.
Under the current system, platforms that follow these custody rules do not need to set aside specific reserves to cover potential losses, thereby exposing customers in the event of a hack or platform outage.
According to the Nikkei, Japan’s Financial Services Agency plans to require crypto asset exchanges to establish mandatory reserve funds to cover losses due to unauthorized access or other asset outflow incidents, ensuring prompt compensation to customers. The financial system…
-Wu Blockchain (@WuBlockchain) November 24, 2025
The reserve model is based on long-followed rules in the Japanese securities industry
The new system will waive reserve requirements on securities firms, which require them to set aside funds to cover losses associated with illegal or unfair practices such as erroneous orders.
Major Japanese brokerage firms currently maintain reserves ranging from 2 billion to 40 billion yen, or approximately $12.7 million to $255 million, and these amounts are linked to trading volume and other risk factors.
In the same context, regulators plan to use these previous rules, as well as lessons learned from cryptocurrency leak incidents, to determine appropriate reserve levels for digital asset trading platforms. To ease pressure on balance sheets, the authority is also considering allowing platforms to cover part of their liabilities with insurance, which would combine capital reserves and transfer of risks to third parties.
Authorities are seeking to strengthen protections against bankruptcy and hacking, and the proposed framework aims to support rules requiring the separation of customer assets from the platform’s equity and to facilitate independent management — such as a court-appointed attorney — to return assets to users if management loses control or the platform collapses.
Major hacks renew pressure on Japan to strengthen platform protections
These developments follow a series of major advances. In May 2024, DMM Bitcoin reported the theft of an estimated ¥48.2 billion worth of Bitcoin (BTC). In February 2025, global platform Bybit revealed that hackers had stolen approximately $1.46 billion in digital currencies. These attacks have reignited fears in Tokyo that large platforms are still targeted even if they use cold storage.
Other jurisdictions are moving in the same direction, with the European Union requiring cryptocurrency service providers to hold capital and use insurance to protect customer assets under the European Digital Asset Market Regulation (MiCA), while Hong Kong requires licensed platforms to guarantee loss recovery funds through insurance and deposit policies, and Japan’s plan aims to establish a formal framework for liability reserves to increase protection systems and bring them closer to these international models.
Traders face tighter security restrictions and higher compliance costs as the market evolves.
National rules evolve alongside policymakers’ changing perspectives on digital assets. Japan initially expected cryptocurrencies to develop primarily as payment instruments and be regulated under the Payment Services Act; However, their growing use as investment products has sparked discussions about moving parts of the industry to the Financial Instruments and Exchange Act, which covers securities and derivatives and includes provisions on insider trading.
According to the Asahi newspaper, Japan is preparing for a broader reset of its crypto laws, with more currencies treated as financial products subject to insider trading laws, with reduced profit taxes to encourage regulated participation in the market.
At the same time, the Japan Exchange Group, which runs the Tokyo Stock Exchange, is considering stricter use of listing rules and possible new auditing requirements for listed companies that are turning into major digital asset troves, following huge losses during recent waves of buying and accumulation that have sparked investor concerns about security factors.
When it comes to crypto platforms, the reserve plans indicate that Japan wants to keep the market open, but with security restrictions that mimic those of the traditional financial sector. For traders, this provides enhanced security in the event of problems, but with higher compliance requirements, which can reshape the landscape and determine which platforms can afford to operate.
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