Japan’s Financial Services Agency (FSA) is poised to review existing regulations that could allow banks to hold Bitcoin and other cryptocurrencies. This potential change represents a significant departure from the agency’s current policy, which prohibits banks from direct exposure to digital assets due to concerns over price volatility. Should the proposal be approved, it would enable banks to operate licensed crypto exchanges, allowing them to play a more substantial role in the burgeoning digital asset sector.
FSA Reviews Crypto Rules for Banks
The FSA is preparing to present its review of supervisory guidelines that currently prevent banks from owning crypto assets like Bitcoin. These rules, which were last revised in 2020, were instituted to shield banks from the risks associated with price fluctuations and liquidity issues. According to reports, the FSA will discuss these proposals during an upcoming meeting of the Financial Services Council, which advises the Prime Minister on financial policy. The proposed reforms could align the management of crypto assets with that of traditional financial instruments such as stocks and bonds.
In this review, officials will delve into how banks can effectively manage the inherent risks associated with holding cryptocurrencies. These risks include sudden price shifts that could adversely affect a bank’s balance sheet. If the proposal progresses, banks may be required to adhere to stringent capital requirements and implement new risk-management frameworks.
Bank Groups May Run Licensed Crypto Exchanges
In addition to permitting banks to hold cryptocurrencies, the FSA is also exploring whether banks should be allowed to operate as licensed crypto exchange operators. Currently, banks are mandated to establish separate entities to provide crypto services. If the reforms are enacted, bank groups could directly register and offer a range of services, including trading and custody of crypto assets, making these services more accessible and secure for customers who prefer to utilize established financial institutions.
The FSA’s aim is to create a regulatory framework that allows bank-backed crypto exchanges to operate under standards similar to those governing other financial products. This initiative is part of a broader strategy to regulate digital assets under the Financial Instruments and Exchange Act (FIEA), moving away from the current Payments Services Act.
Crypto Use in Japan Continues to Grow
Japan’s cryptocurrency market has seen rapid expansion over the past five years. As of February 2025, there were over 12 million registered crypto accounts in the country, a figure that is more than three times the number recorded five years earlier, according to data from the FSA. This growth has sparked calls for more robust regulations to protect investors and ensure financial stability. Transitioning crypto oversight to the FIEA is viewed as a viable solution, as the FIEA is already equipped to manage securities and investment products, thereby facilitating the application of established regulations to digital assets.
The FSA recently stated that many challenges associated with cryptocurrencies mirror those in the securities sector. Consequently, applying similar oversight methods could enhance compliance and bolster investor protection.
Stablecoin and Insider Trading Developments
In conjunction with the ongoing crypto reforms, Japan’s largest banks are collaborating on a yen-pegged stablecoin. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corp., and Mizuho Bank are set to launch this stablecoin to reduce transaction costs for businesses. Meanwhile, the Securities and Exchange Surveillance Commission is planning to impose stricter penalties for insider trading within crypto markets. These initiatives aim to support broader reforms designed to enhance the security and transparency of the digital asset landscape.
The FSA’s review signifies a pivotal step toward greater involvement of banks in Japan’s digital asset market. If the proposed changes are approved, they could fundamentally alter how major financial institutions manage cryptocurrencies in the country.
