Japan Tightens Crypto Exchange Regulations to Enhance User Protections
Japan's Financial Services Agency (FSA) is mandating cryptocurrency exchanges to hold liability reserves as a safeguard against hacks and fraud. Proposed amendments to the Payment Services Act will require platforms to maintain a portion of customer assets domestically, mitigating risks of unauthorized outflows. The regulatory overhaul—Japan's most significant in two years—follows June 2025 revisions to the Payment Services Law.
The MOVE accelerates after Japan Digital Design Inc. (JDD) reported internal system vulnerabilities, prompting collaboration with external security firms like Mitsui Knowledge Industry Co. Recent attacks on overseas exchanges further spurred the FSA's decision. Exchanges must now establish segregated buffer funds, ensuring customer losses from breaches or fraudulent transactions are fully covered by insurance-backed reserves.
