Regulatory changes are being made in Japan’s cryptocurrency sector, and soon, hackers will not be able to exploit vulnerabilities in the crypto system. After billions of yen were stolen from exchanges, regulators have decided to introduce more strict regulations.
Japan’s Financial Services Agency (FSA) is introducing new rules that will mandate cryptocurrency exchanges to keep reserve funds so that users can be quickly compensated when some scam happens. These rules would make it mandatory to keep the reserves through amendments to the Payment Services Act, with a bill slated for submission to the parliament in 2026.
Closing the Backdoor
The real problem, regulators discovered, is not the exchanges themselves. Third-party companies providing custody and trading services have been operating in a regulatory gray zone, and hackers know this well.
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Last year’s incident of cryptocurrency exchange platform DMM Bitcoin getting hacked made it painfully clear that better rules were needed to make the industry more secure. Thieves walked away with $312 million in bitcoin by exploiting weaknesses at Ginco, an outside software firm handling DMM’s trading systems. In September 2025, a breach at a cryptocurrency mining pool operator, SBI Crypto, also resulted in losses of about $21 million in digital assets. Now the FSA wants these service providers to register with authorities before they can work with exchanges, and there will be no exceptions to this.
With around 12 million cryptocurrency accounts in a population of approximately 123 million, Japan has to create a balance between protecting investors and staying strong in the digital economy.
But it is not all restrictive. The country recently approved JPYC, its first yen-backed stablecoin, and the biggest Japanese banks are now racing to launch it. Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho have already built a platform for issuing digital tokens. As the rules tighten, the country hopes to prove that innovation and investor protection can coexist.
