The Financial Services Agency (FSA) in Japan will reportedly require cryptocurrency exchanges to maintain liability reserves. This measure is intended to guard against hacks or unforeseen events that could impact users.
According to a report by Nikkei on Monday, Japan’s FSA will revise its requirements for local companies. These revisions will include methods for quickly compensating users who are affected by security breaches or other incidents. The financial watchdog reportedly cited recent hacks of global exchanges as a significant reason behind this proposed change.
The Financial System Council, which serves as an advisory body to the FSA, is reportedly set to release a report on this matter. This release is expected to follow a meeting scheduled for Wednesday. One of the key recommendations anticipated in this report would be a requirement for crypto firms to establish liability reserve funds.
This development follows earlier reports indicating that the FSA plans to review existing regulations. These reviews are aimed at potentially allowing banks to purchase and hold crypto assets. Japan continues to be a country with a significant concentration of crypto users. As of February, approximately 12 million accounts were registered, according to data from the FSA. This represents a notable portion of Japan's population, which is around 123 million.
Yen-Pegged Stablecoin Launched
Following the establishment of regulations recognizing the potential for a stablecoin pegged to the Japanese yen, the Tokyo-based fintech firm JPYC launched its digital asset in October. According to the company, the JPYC stablecoin is backed one-to-one by bank deposits and government bonds.
In 2022, Japanese regulators prohibited the issuance of stablecoins by non-banking institutions. However, the FSA signaled in August that it could approve the first yen-backed token by 2026. This indicates a gradual shift in regulatory approach towards stablecoins.
Several of the country's largest financial institutions, including Mitsubishi UFJ Financial Group, Bank of Sumitomo Mitsui Banking Corp, and Mizuho Bank, launched their stablecoin issuance platform, Progmat, in 2023. These institutions are reportedly exploring the development of their own stablecoin tokens.
Monex Group, another prominent Japan-based financial company, is also actively considering the launch of its own yen-pegged stablecoin, further highlighting the growing interest in this area within the Japanese financial sector.