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Japan is eager to create a framework enabling banks to trade cryptocurrencies, including Bitcoin.
Summary
- The FSA in Japan might allow banks to purchase and hold Bitcoin and other digital currencies.
- The proposed framework would enforce stringent risk guidelines for cryptocurrency holdings by banks.
- Banks could register as exchanges, enhancing access for retail investors.
The Financial Services Agency (FSA) of Japan is initiating discussions on regulatory changes that would permit banks to acquire and hold cryptocurrencies similarly to stocks and government bonds.
According to local sources, this topic will be addressed in an upcoming working group meeting of the Financial Services Council, which advises the Prime Minister.
The FSA is anticipated to implement regulations that consider the implications for banks’ financial stability, focusing on establishing risk management systems for cryptocurrency holdings.
Current restrictions highlight concerns over price volatility
The supervisory guidelines from the FSA, updated in 2020, effectively prevent bank groups from acquiring cryptocurrencies for investment purposes.
The guidelines indicate that substantial holdings in cryptocurrency could lead to significant losses during sharp price declines, potentially jeopardizing a bank’s financial condition.
Even if acquisition and holding receive approval, the FSA is expected to impose rigorous regulations, accounting for the implications on banks’ financial health.
The working group is likely to delve into the creation of comprehensive risk management frameworks tailored to address cryptocurrency volatility and market shifts.
Japan’s proactive stance on cryptocurrency regulation provides a solid foundation for these advanced policy discussions.
Exchange registration and increased retail access
The FSA is considering enabling bank groups to register as cryptocurrency exchange operators. Allowing reputable bank groups to engage in this capacity would facilitate easier access to cryptocurrency markets for individual investors.
Cryptocurrency trading is on the rise across Japan, with accounts surpassing 12 million as of February 2025, representing a roughly 3.5-fold increase from five years ago.
Japan was the first major economy to officially recognize Bitcoin (BTC) as a legal means of payment through amendments to the Payment Services Act in 2017.
This framework mandated cryptocurrency exchanges to register with the FSA, adhering to strict guidelines concerning security, customer fund protection, and operational transparency.
The country’s early involvement with cryptocurrencies can be traced back to 2010 when Japanese tech enthusiasts began mining Bitcoin and trading on nascent exchanges.
Stablecoin update
Currently, three of Japan’s largest banks—Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corp. (SMBC), and Mizuho Bank—are working together to issue a yen-pegged stablecoin aimed at modernizing corporate settlements and reducing transaction costs.
This stablecoin will utilize MUFG’s Progmat platform and is projected to launch by year-end.
As reported by Nikkei, this initiative aims to ensure interoperability for payments among and within companies.
Mitsubishi Corp. will be the first to implement the stablecoin for internal transactions, potentially optimizing international transfers and minimizing administrative costs. If successful, it could pave the way for Japan’s inaugural bank-backed stablecoin network.
Additionally, Japan is exploring the concept of a digital yen through the Bank of Japan’s (BOJ) pilot program, which commenced in 2023. The BOJ has been testing a central bank digital currency (CBDC) as part of a larger effort to modernize its economy alongside the evolving digital payments landscape.
As Japan continues to innovate in the cryptocurrency arena, its regulatory framework is crucial in influencing the industry’s growth trajectory. While private sector efforts like the yen-pegged stablecoin illustrate the nation’s move toward adoption, individual investors are looking to the FSA for clarity on easier access to cryptocurrency markets.
