The Financial Services Agency in Japan will reportedly require cryptocurrency exchanges to maintain liability reserves as part of measures to guard against hacks or unforeseen events.
According to a Monday Nikkei report, Japan’s FSA will revise its requirements for local companies to include methods for quickly compensating users affected by security breaches or other causes. The financial watchdog reportedly cited recent hacks of global exchanges as part of the reason behind the change.
The Financial System Council, an advisory body to the FSA, is reportedly set to release a report on the matter following a meeting on Wednesday. One of the expected recommendations would require crypto firms to create liability reserve funds.
The move follows reports that the FSA plans to review regulations that would allow banks to purchase and hold crypto assets. Japan remains a country with a high concentration of crypto users, with about 12 million accounts registered as of February, according to data from the FSA. The country has a population of about 123 million.
Yen-pegged stablecoin launched
Long after establishing regulations recognizing a potential stablecoin pegged to the Japanese yen, the Tokyo-based fintech firm JPYC launched the 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.
Some of the country’s largest financial institutions, including Mitsubishi UFJ Financial Group, Bank Sumitomo Mitsui Banking Corp and Mizuho Bank, launched their stablecoin issuance platform Progmat in 2023, and are reportedly exploring their own token.
Monex Group, another Japan-based financial company, is also considering the launch of a yen-pegged stablecoin.