Japan Calls for Mandatory Reserves Following $21 Million SBI Hack

Japan Calls for Mandatory Reserves Following $21 Million SBI Hack - Implications Explained

Japan's Financial Services Agency (FSA) is set to propose new legislation that mandates cryptocurrency exchanges to hold liability reserves to protect customers in the event of hacks or security issues. This initiative follows a recent $21 million hack at SBI Crypto and highlights the country's growing focus on safeguarding its cryptocurrency investors.

Key Takeaways

Proposed legislation is anticipated to be submitted to parliament in 2026.
Exchanges will be required to store the majority of customer assets in cold wallets, but now must maintain financial reserves to cover potential losses.
Japan is intensifying its efforts to better protect its expanding community of crypto investors.

Japan’s FSA crypto plans

New Regulations for Crypto in Japan

The Financial Services Agency (FSA) of Japan is getting ready to introduce new rules that will obligate cryptocurrency exchanges to hold liability reserves. This measure aims to ensure that users are compensated in case of hacks or breaches in security. Currently, Japanese crypto regulations mandate that exchanges keep most of their customers’ assets in cold wallets to minimize the risk of online attacks.

However, there is no existing requirement for these platforms to maintain dedicated reserves to cover potential losses, which leaves users exposed if an exchange experiences a breach or operational failure. To address this concern, the FSA plans to submit the new legislation to the parliament in 2026, indicating a move to align crypto oversight with existing regulations that govern traditional markets.

Benefits to Japan’s Crypto Environment

In the current setup for traditional securities, brokers are required to maintain financial reserves to protect against losses due to unfair practices, including system errors or incorrect orders that can result in financial harm. Major securities firms in Japan usually maintain reserves between ¥2 billion and ¥40 billion, which translates to approximately $12.7 million to $255 million, depending on their trading activity and risk factors.

The FSA intends to create reserve requirements modeled after these standards for traditional securities and will review past incidents of crypto breaches. Exchanges may also have the option to utilize insurance as a means to alleviate financial risks. The proposed regulations will significantly enhance insolvency protections, which includes enforcing stringent asset segregation rules and simplifying the process for returning customer funds in the event of an exchange’s collapse.

Japan's push for more stringent oversight is a direct response to several notable security breaches that have plagued the country's cryptocurrency sector. The collapse of Mt. Gox in 2014, for example, still has lingering effects, with repayments to affected customers only beginning in 2024. In another example, DMM Bitcoin lost 4,502 BTC linked to a North Korea-related hack, while SBI Crypto had $21 million stolen and laundered through Tornado Cash. These repeated security failures underline the necessity for improved consumer protections, making the proposal for reserve requirements a critical step towards reinstating confidence in Japan's digital asset market.

Japan's Crypto Adoption Rates and Trends

Despite the security issues and market collapses, Japanese investors remain dedicated to cryptocurrency. Recent statistics from Chainalysis show an impressive 120% increase in on-chain value received in the year leading up to June 2025. This increase marks the strongest growth among major markets in the Asia-Pacific region. Contributing factors include tax reforms, new regulations surrounding stablecoins, and clearer recognition of investment opportunities.

Domestic trading patterns also highlight this trend, with XRP transactions in Japanese yen reaching $21.7 billion, significantly surpassing those of Bitcoin (BTC) and Cardano (ADA).