Daniel Walker
Japan’s Financial Services Agency (FSA) is weighing the introduction of a new regulatory framework that would require digital asset custodians and trading management firms to register with authorities before offering services to cryptocurrency exchanges.
According to a report from Nikkei, the proposal was discussed on Nov. 7 during a meeting of the Financial System Council, an advisory body to the Japanese Prime Minister. The move aims to bolster security and transparency within Japan’s expanding crypto sector.
Currently, crypto exchanges in Japan must adhere to strict asset management rules, including keeping customer funds in cold wallets. However, no equivalent requirements apply to third-party service providers that manage trading systems or custody operations on behalf of exchanges.
Under the proposed framework, the FSA would mandate registration for all custody and trading management firms. Additionally, crypto exchanges would be required to use only registered service providers, ensuring better oversight and reducing the risk of security breaches and operational failures, Nikkei reported.
Lessons from the DMM Bitcoin Hack
The urgency for tighter regulation follows several high-profile security incidents, most notably the 2024 DMM Bitcoin hack, in which hackers stole 48.2 billion yen (approximately $312 million) worth of Bitcoin. Investigations traced the breach back to Tokyo-based software company Ginco, which handled DMM’s trading management services.
This incident highlighted the vulnerabilities in outsourced systems, prompting regulators to consider stronger rules for all third-party participants in the digital asset ecosystem.
Support from Policymakers and Timeline for Implementation
Most members of the FSA’s working group reportedly backed the new registration system, emphasizing the need for clearer digital asset regulations and a more resilient market structure.
The FSA is expected to compile a detailed report summarizing its recommendations and plans to submit amendments to the Financial Instruments and Exchange Act during the 2026 ordinary Diet session, according to Nikkei.
FSA Expands Focus to Stablecoin Development
Alongside its regulatory push, the FSA has been actively promoting stablecoin innovation in Japan. In October 2025, the agency approved the nation’s first yen-pegged stablecoin, JPYC, which launched shortly after approval.
More recently, the FSA announced support for a stablecoin pilot program involving Japan’s three largest banks — Mizuho Bank, MUFG, and SMBC — marking another major step toward establishing a secure and compliant digital financial ecosystem.
By tightening rules for custodians and backing stablecoin projects, Japan continues to position itself as a global leader in building a safer, regulated, and forward-looking crypto market.
