Safer Crypto Trading in Japan: New Rules to Force Exchanges to Backstop User Funds

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Crypto investors in Japan are set to gain a significant new layer of protection. In response to major industry hacks, regulators are preparing a rule that would force exchanges to maintain cash reserves specifically for compensating users if their funds are lost to cyberattacks.

This new “reserve mandate” from Japan’s Financial Services Agency (FSA) would mark a major shift. While exchanges currently must use secure cold storage, they are not required to have insurance-like funds for post-hack payouts.

The proposed law, slated for parliament next year, aims to change that, ensuring that customers are made whole even after a security breach. This comes after the $312 million DMM Bitcoin hack exposed the risks of relying on outsourced partners without sufficient safeguards.