Japan’s Financial Services Agency Enhances Cryptocurrency Security
Japan’s Financial Services Agency (FSA) is taking proactive steps to enhance the security of cryptocurrency exchanges by mandating that these platforms establish liability reserve funds. This requirement is part of a broader strategy to safeguard users against potential hacks and other unexpected disruptions, as reported by Nikkei on Monday.
Regulatory Framework Revisions
The FSA aims to revise its regulatory framework, ensuring that local exchanges incorporate rapid compensation mechanisms for users impacted by breaches in security or other incidents. The need for such measures has been underscored by recent hacking incidents affecting exchanges worldwide.
Following a meeting scheduled for Wednesday, the Financial System Council—an advisory group to the FSA—is expected to issue a report with official recommendations, including the establishment of these reserve funds by crypto companies.
This initiative aligns with the FSA’s ongoing review of regulations that might enable banks to invest in and hold cryptocurrencies.
Growing Cryptocurrency Adoption in Japan
With approximately 12 million cryptocurrency accounts in a nation of about 123 million people, Japan has a significant number of crypto enthusiasts. The FSA’s new directive comes as part of its commitment to foster a safer trading environment in the bustling digital asset market.
Launch of New Stablecoin
In a related development, the fintech company JPYC has just launched a stablecoin pegged to the Japanese yen after gaining regulatory approval for stablecoin recognition. This digital asset is said to be fully backed by bank deposits and government bonds at a one-to-one ratio.
Back in 2022, Japanese authorities had banned the issuance of stablecoins by entities outside the banking sector, but the FSA indicated its openness to potentially sanction the first yen-pegged token by 2026. Furthermore, major financial institutions such as Mitsubishi UFJ Financial Group and Mizuho Bank, which partnered for stablecoin development through their Progmat platform in 2023, are also believed to be considering their own stablecoin projects.
