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Japan strengthens its crypto regulatory framework as the Financial Services Agency orders exchanges to secure safety reserves that protect users during failures or disruptions. The new rules require platforms to keep a portion of customer assets domestically, reducing risks linked to unauthorized transfers or foreign exposure. Authorities accelerate the rollout after operational issues surfaced at Japan Digital Design Inc. and as hacking incidents abroad raise concerns.
The reserve requirement forms a key part of Japan’s latest regulatory overhaul. The FSA advances work on specific rule changes under the Payment Services Act. These rules follow amendments passed in June 2025.
Exchanges now create liability reserves that function as dedicated user-protection buffers. These reserves help secure reimbursements when hacks or fraudulent outflows occur. The FSA responds quickly after internal issues emerge at JDD and prompts a review of its security partnerships.
Recent cyberattacks on foreign platforms also push Japan to strengthen oversight. One major Japanese exchange suffered a severe breach in 2024 due to weaknesses in external systems. Local regulators aim to ensure similar incidents no longer affect users.
Japan considers redefining how digital assets fit into its legal structure. Crypto assets currently fall under the Payment Services Act. The FSA now reviews a possible shift toward the Financial Instruments and Exchange Act.
This change places digital assets within the same legal category as securities like stocks and bonds. It also introduces insider-trading restrictions for crypto markets. Authorities plan to reduce capital-gains taxes on digital assets to a flat 20 percent, similar to rates on financial instruments.
Japan also intends to require custodians and infrastructure partners to register before working with exchanges. This plan follows vulnerabilities exposed during the DMM Bitcoin incident, where attackers entered systems through an unregulated third-party. Could stricter onboarding rules reshape Japan’s broader crypto service landscape?
The FSA will submit the legal amendment to parliament in 2026. If legislators approve it, exchanges adopt audits, disclosure rules, and tighter operational standards.
Japan’s reforms arrive as domestic financial institutions enter the digital asset sector. Mitsubishi UFJ Asset Management and Daiwa Asset Management prepare to launch Japan’s first crypto investment trusts. Their move signals growing institutional interest in a maturing regulatory environment.
Additionally, JPYC introduces the world’s first fully redeemable yen-pegged stablecoin backed by domestic deposits and Japanese government bonds. Japan supports wider stablecoin development through projects linked to major banks.
Japan’s approach aligns with global regulatory momentum. The EU and Hong Kong require exchanges to secure insurance or capital buffers. Japan builds similar protections through its mandate for liability reserves.
The government also considers allowing banks to hold and trade digital assets. Authorities continue examining how domestic banking infrastructure can integrate digital asset custody and trading services.
Also Read: Best Crypto-Friendly Cities in Japan
Japan advances a stronger regulatory framework as the FSA introduces safety reserves, domestic asset storage, and expanded oversight to limit user risks and strengthen market integrity. These measures support a clearer structure for digital assets and encourage secure growth across the country’s evolving crypto sector.
