Japan’s Financial Services Agency (FSA) is expected to implement new regulations requiring cryptocurrency exchanges to maintain liability reserves to protect users in the event of hacks or other unforeseen incidents.

A report from Nikkei indicates that the FSA will revise existing requirements for local crypto companies, demanding they set aside reserves for quicker user compensation in the case of security breaches. This decision is influenced by recent hacking incidents affecting global exchanges.

The FSA’s Financial System Council is anticipated to address this topic in an upcoming report following a scheduled meeting on Wednesday. One of the key recommendations is likely to involve the establishment of liability reserve funds by crypto companies.

Further developments suggest that the FSA is also reviewing regulations that would permit banks to buy and hold cryptocurrency assets. As of February, Japan is home to roughly 12 million cryptocurrency accounts, indicating a substantial user base within a population of approximately 123 million.

Yen-Pegged Stablecoin Development

Following substantial regulatory frameworks for stablecoins linked to the Japanese yen, fintech company JPYC has successfully launched a yen-backed stablecoin this October. This asset is purportedly backed 1:1 by bank deposits and government bonds.

In 2022, regulations were established in Japan prohibiting the issuance of stablecoins by non-banking entities. However, the FSA has hinted at the possibility of approving a yen-backed stablecoin by 2026.

Various prominent financial institutions in Japan, including Mitsubishi UFJ Financial Group and Bank Sumitomo Mitsui Banking Corp, have initiated a stablecoin issuance platform named Progmat in 2023, and are reportedly exploring their own tokens. Additionally, Monex Group is considering launching a yen-pegged stablecoin.