Japan has taken a significant step towards enhancing user protection in the crypto space by mandating liability reserves for cryptocurrency exchanges. The new regulation, set to take effect in 2026, requires exchanges to hold substantial funds to compensate users impacted by hacks or operational failures. This measure follows a history of security breaches within Japan’s crypto market and aligns with regulations implemented in other jurisdictions like the EU and Hong Kong. The Financial Services Agency (FSA) has mandated that exchanges maintain liquidity reserves between ¥2 billion and ¥40 billion yen, aiming to fortify user trust and bolster market confidence. This decision directly affects the Japanese crypto trading industry, prompting changes in operational practices and financial regulations. With the implementation of this new regulation comes a focus on enhanced security measures, potentially leading to a safer and more stable investment environment.