Japan Sets Out to Rebuild Investor Confidence in Crypto Following Significant Security Breaches
- Japan's FSA will mandate crypto exchanges to hold liability reserves proportional to trading volumes and security risks, modeled after traditional securities safeguards. - The reform responds to major breaches like the 2024 DMM Bitcoin hack ($312M stolen) and allows exchanges to offset reserve costs via insurance policies. - New rules require segregating user funds from corporate assets and reclassify crypto as securities under the Financial Instruments Act to enable investment products. - Experts view t
Japan’s Financial Services Agency (FSA) is preparing to implement a significant new rule that will require cryptocurrency exchanges to hold liability reserves, aiming to shield investors from losses caused by hacks or operational mishaps. Inspired by protections in place for conventional securities companies,
This move from the FSA follows several notable breaches, such as
The regulatory update will also introduce procedures to simplify the process of returning assets in the event of bankruptcy. Exchanges must keep customer funds separate from company assets, and
In addition to liability reserves, the FSA is rethinking Japan’s overall approach to crypto oversight.
Industry observers have praised these reforms as a positive step toward stabilizing a sector still recovering from the 2014 Mt. Gox collapse. Musheer Ahmed, founder of Finstep Asia,
The FSA’s planned changes aim to strike a balance between safeguarding investors and encouraging innovation in a market that now boasts over 12 million accounts
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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