Japan Mandates Crypto Exchange Reserves in Bid to Curb Hack Risks

Japan's Financial Services Agency is drafting legislation that would force cryptocurrency exchanges to maintain dedicated reserves, mirroring protections long established in traditional securities markets. The proposed rules aim to shield investors from losses caused by hacks or operational failures—a persistent vulnerability in digital asset trading.

The regulatory overhaul, slated for parliamentary submission in 2026, would require platforms to compensate users through pre-funded reserves rather than relying solely on existing cold wallet storage mandates. This marks Japan's latest move to reinforce its position as one of the world's most tightly controlled crypto jurisdictions.

Current safeguards—including the requirement that exchanges store 95% of customer assets in offline wallets—have proven insufficient against sophisticated cyberattacks. The Nikkei report suggests the new framework WOULD create faster payout mechanisms while maintaining Japan's characteristically strict oversight approach.