Japan FSA Considers Letting Banks Hold Bitcoin and Cryptocurrencies
Japan’s Financial Services Agency is preparing to break new ground in cryptocurrency regulation. The FSA is reviewing rules that could allow banks to hold Bitcoin and other cryptocurrencies for investment purposes. This represents a dramatic departure from the country’s conservative approach to digital assets.
Current supervisory guidelines, revised in 2020, effectively ban banks from holding crypto due to volatility risks. The upcoming reforms would overturn these restrictions, and banks could soon manage cryptocurrencies alongside traditional assets like stocks and bonds.
Banks Could Operate Crypto Exchanges Under New Framework
The proposed changes extend beyond simple holdings. Under new reforms, banks may be allowed to run licensed crypto exchanges. This would enable established financial institutions to offer trading and custody services directly to customers.
The FSA plans to discuss the reform at an upcoming meeting of the Financial Services Council, an advisory body to the Prime Minister. The initiative aims to align crypto asset management with traditional financial products. Regulators are exploring frameworks to manage risks like sharp price swings that could impact banks’ financial health.
Crypto Adoption Surges Across Japan’s Financial Sector
Japan’s crypto market has grown rapidly over the past five years, with over 12 million registered crypto accounts as of February 2025. This figure is more than triple the number from five years ago. Chainalysis’s report singled out Japan as the fastest-growing crypto market across the broader Asia-Pacific region in 2025, with 120% crypto market growth.
The explosive growth has prompted calls for updated regulations. Japan plans to shift crypto oversight to the Financial Instruments Act. This law currently governs securities and investment products. The FSA believes crypto issues closely match those already covered under securities law.
Major Banks Collaborate on Yen-Backed Stablecoin Initiative
Three of Japan’s largest banks, including Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corp., and Mizuho Bank, have joined forces to issue a yen-pegged stablecoin. The stablecoin aims to streamline corporate settlements and reduce transaction costs.
These developments occur alongside other regulatory improvements. Japan’s Securities and Exchange Surveillance Commission plans to introduce new rules to ban and penalize crypto insider trading. The measures support broader reforms, making the digital asset space more secure and transparent.
Risk Management Safeguards Central to Banking Crypto Reforms
The FSA recognizes the need for robust protections. The FSA aims to create a structure where bank-backed crypto exchanges can operate under similar standards applied to other financial products. Banks would need to implement strict risk management systems to handle cryptocurrency volatility.
The FSA recently stated that many challenges in crypto are similar to those in the securities sector. Applying the same oversight methods could improve compliance and investor protection. The regulator wants to ensure that crypto exposure doesn’t threaten bank financial stability.
The reforms reflect Japan’s growing recognition of cryptocurrencies as legitimate assets. The country saw positive policy shifts, with the FSA proposing to reclassify crypto assets into “financial products” to pave the way for crypto ETFs. This framework applies to securities and traditional financial products.
Conclusion
The FSA’s review marks a major step toward deeper involvement of banks in Japan’s digital asset market. If approved, the changes could reshape how major financial institutions handle crypto. The move positions Japan as a leader in integrating cryptocurrencies into mainstream banking systems while maintaining regulatory safeguards.
