Japan is preparing new rules that could significantly change the way crypto assets are stored and handled in the country. The Financial Services Authority (FSA) wants companies that hold or manage cryptocurrencies for exchanges to be formally registered with the government. This means that any custodial or transaction management provider must prove that it is secure and compliant before touching user assets.
Why is Japan doing this?
Japanese virtual currency exchanges already have strict rules. They must protect their users’ funds, store most assets in cold wallets, and maintain clear internal controls. But there is a loophole. These rules do not apply to outside companies that exchange employment for storage or trade support.
This gap became a real problem in 2024. DMM Bitcoin, one of Japan’s major exchanges, was hacked and 48.2 billion yen (approximately $312 million) worth of Bitcoin was lost. The hack did not occur within the exchange itself. It came into being through Ginco, a third-party software company that handled some of the exchange’s trading operations. The incident exposed a major weakness in that even if an exchange is secure, unregulated external partners can put users’ funds at risk.
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what the new rules do
Under the plan, companies providing crypto-asset storage or trading services will be required to register with the authorities before conducting business. Exchanges will only be allowed to use custodians that are on the government’s approved list. This means that if a provider touches user assets in any way, it must meet the same security standards as the exchange itself.
Members of Japan’s Financial Services Council, which advises the prime minister, discussed the proposal on November 7. Most members supported the change, the Nikkei Shimbun reported. The Financial Services Agency plans to turn these discussions into a formal proposal, with the aim of submitting a bill to revise the existing financial law during the 2026 Diet session.
What it means for cryptocurrency users
The regulations come at a time when Japan is actively promoting new cryptocurrencies and blockchain initiatives. The Financial Services Agency recently approved Japan’s first yen-backed stablecoin, JPYC, and is supporting a stablecoin pilot involving Japan’s three largest banks, Mizuho Bank, MUFG Bank, and SMBC Bank. These projects show that Japan wants to lead in digital finance without sacrificing security. For everyday crypto holders, this move means increased protection. Exchanges will no longer be able to outsource important operations to unknown companies or companies with insufficient security. Anything involving user assets will require government oversight and registration.
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FAQ
Japan requires all companies managing cryptocurrencies for exchanges to register with the government to ensure security and compliance.
The 2024 hack exposed the risks posed by unregulated third-party companies and increased oversight to protect users’ funds.
Exchanges can only use registered custodians, ensuring that all partners meet the same security standards as the exchange itself.
Yes, it prevents exchanges from outsourcing key operations to unidentified companies and adds a layer of government oversight.
The FSA plans to introduce legislation in 2026, and registration requirements are likely to come into force after parliamentary approval.
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