Japan’s Financial Services Agency Reviews Crypto Ban on Banks to Align Digital Assets With Tradit...

Japan may let banks hold Bitcoin and offer crypto services under stricter financial rules and oversight.

Banks could soon run crypto exchanges directly without creating separate companies for digital asset services.

Crypto oversight might shift to the FIEA to boost investor protection and align rules with traditional securities.

Japan’s Financial Services Agency (FSA) is reviewing rules that currently prevent banks from holding cryptocurrencies like Bitcoin. The proposed changes could allow banks to invest in digital assets directly. This review will be discussed at an upcoming meeting of the Financial Services Council, which advises the Prime Minister.

The current policy, last updated in 2020, restricts banks from holding crypto due to high volatility and financial risk. Regulators now aim to align crypto asset handling with that of traditional instruments like stocks and government bonds.

If approved, banks may need to meet strict capital requirements. They would also need to follow risk-management frameworks to protect financial stability.

Banks Could Run Crypto Exchanges

The FSA is also considering a rule change that could let banks operate licensed crypto exchanges. At present, banks must create separate companies to provide crypto services. If the changes take effect, bank groups could register directly as crypto exchange operators. This would let them offer trading and custody services under one roof.

The reforms would place these services under existing financial laws. They could also increase customer trust by tying digital asset services to established financial institutions.

Crypto Oversight May Shift to FIEA

In September, the FSA proposed shifting crypto regulation from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA). The move is intended to strengthen investor protections and apply clearer rules. In March, Japan’s FSA announced plans to prevent insider trading in crypto markets through proposed regulatory changes.

The FIEA already governs stocks and other investment products. Moving crypto under this law could allow regulators to apply similar oversight methods.

Officials believe crypto faces many of the same issues as traditional securities. This change would help address compliance gaps in the current system.

Rising Crypto Adoption Spurs Reform

Japan’s crypto market has grown quickly in recent years. There were more than 12 million crypto accounts registered in the country as of February 2025. This is a figure that is over three times greater than five years ago.

This sharp increase has brought about pressure to enhance stronger regulation. Authorities are focusing on protecting investors and ensuring market stability. In April, Japan’s FSA announced plans to classify crypto assets into two groups to improve oversight and regulatory clarity.

Separately, Japan’s three biggest banks are working on a yen-pegged stablecoin. Mitsubishi UFJ, SMBC, and Mizuho Bank will leverage it to reduce the cost of transactions. Moreover, Japan is preparing to approve its first yen stablecoin this fall with JPYC set to lead the rollout.

The Securities and Exchange Surveillance Commission also intends to implement penalties for crypto insider trading. These measures are part of a larger process of increasing supervision of the digital asset space.