Japan's Financial Services Agency pushes to mandate 'liability reserves' for exchanges…tightening regulations against hacking and accidents

Japan's Financial Services Agency (FSA) is reportedly pushing to require virtual asset (cryptocurrency) exchanges to accumulate liability reserves to prepare for unexpected situations such as hacks.

On the 25th (local time), according to Nikkei cited by Cointelegraph, the FSA is considering amending regulations based on a series of recent global virtual asset exchange hacks so that operators in Japan have a framework to secure funds to promptly compensate users for losses.

The reserve requirement is intended to cover not only hacking losses but also other unexpected operational incidents. In this regard, the FSA's advisory body, the Financial System Council, is scheduled to publish a related report at a meeting on Wednesday, and it is reported that the report will include a recommendation that "virtual asset companies should be required to establish liability reserve funds."

This measure also coincides with recent reports that the Japanese government is considering allowing banks to hold virtual assets. Japan already has a high penetration rate of virtual assets; according to FSA data, as of February the number of registered accounts reached about 12 million. This is a significant proportion of the total population of about 123 million.