On November 7, at the fifth meeting of the Financial System Council’s Virtual Currency Systems Working Group, regulators discussed plans to bring virtual currency lending under the Financial Instruments and Exchange Act.
Their goal is to strengthen investor protection and promote fairer market practices in crypto lending services.
close the loophole
Currently, crypto companies that provide asset management and staking services must register as crypto exchanges. But some companies are getting around this rule by framing their services as “borrowing” rather than management. This legal gap allows them to operate without the same oversight as registered exchanges.
The Financial Services Agency’s concerns are clear. When users lend out cryptocurrencies, they take on risks such as default by the borrower or a decline in token prices, but companies providing these services do not have the same obligations as licensed exchanges. There is no need to store customer funds separately (this Separate management) or save the asset cold wallet — Offline storage that protects your cryptocurrencies from hacking.
Japan’s Financial Services Agency (FSA) has discussed plans to tighten regulations on crypto lending and bring it under the Financial Instruments and Exchange Act in order to close existing loopholes and mandate stronger risk and custody controls. The agency also proposed investment restrictions…
— Wu Blockchain (@WuBlockchain) November 7, 2025
This lack of safeguards is already causing problems. Some platforms offer unrealistically high returns, such as promising up to 10% interest per year while locking in repayments for years. Other companies demonstrate weak risk management, such as not posting losses. sublease or slashA portion of the staked assets may be seized as a penalty.
A new framework for a safer market
Under the new direction, the Financial Services Agency plans to force virtual currency loan providers to develop stronger risk management. That means vetting the partners they lend to, clearly explaining the risks to customers, and tightening up how they advertise their returns. These rules are designed to prevent misleading advertising and enable investors to make informed choices.
🚨Breaking News🇺🇸 CEO of $86 billion Coinbase says Bitcoin and virtual currency market structure bill will be passed soon! #cipher #bitcoin #coinbase #Regulations #cryptonews pic.twitter.com/cWXnCtlSW1
— Crypto News Hunter🎯 (@CryptoNewsHntrs) November 7, 2025
Importantly, this change does not apply to institutional investors. Transactions conducted between large investors remain outside the scope of these regulations. The focus is on protecting everyday users who may not fully understand the risks involved in lending and staking digital assets.
This move is in line with a growing global trend. Regulators in the U.S. and Europe have also stepped up their scrutiny after major financial firms such as Celsius and BlockFi collapsed in 2022, resulting in the loss of billions of dollars in customer funds.
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