Japan's Financial Services Agency has raised concerns over inadequate insurance coverage for cryptocurrency assets held in cold storage by exchanges. Despite regulations mandating robust security, many exchanges lack sufficient insurance to cover potential losses from hacks or internal malfeasance. The Japan Virtual Currency Exchange Association has proposed limiting online-managed digital assets to 10–20% of customer deposits, emphasizing cold storage to reduce risks. However, insurance policies for offline wallets remain limited, with premiums ranging from 1–5% of insured assets. This gap exposes investors to significant risks, as seen in past hacks costing billions. Enhanced market discipline and stricter compliance protocols are needed to ensure exchanges prioritize asset protection, fostering trust in Japan's crypto ecosystem.