Japan is keen on establishing a framework to allow banks to buy and sell cryptocurrencies, including Bitcoin.
Summary
- Japanโs FSA may let banks buy and hold Bitcoin and other cryptocurrencies.
- New framework would impose strict risk rules on bank crypto holdings.
- Banks could register as exchanges, expanding retail investor access.
The countryโs Financial Services Agency is beginning deliberations on system changes that would allow banks to acquire and hold cryptocurrencies in the same manner as stocks and government bonds.
As per local reports, the matter will be discussed at an upcoming working group meeting of the Financial Services Council, an advisory body to the Prime Minister.
The FSA is expected to impose regulations accounting for the impact on banksโ financial stability, with discussions focusing on establishing risk management systems for cryptocurrency holdings.
Current restrictions show price volatility concerns
The FSAโs supervisory guidelines, revised in 2020, effectively prohibit bank groups from acquiring crypto assets for investment purposes.
The guidelines mentioned that holding large cryptocurrency amounts could result in losses during sudden price drops, potentially worsening a bankโs financial position.
Even if the acquisition and holding receive approval, the FSA is expected to impose strict regulations, considering the impact on banksโ financial status.
The working group will likely discuss establishing comprehensive risk management frameworks specific to cryptocurrency volatility and market dynamics.
Japanโs early embrace of cryptocurrency regulation provides a foundation for these more advanced policy discussions.
Exchange registration and retail access expansion
The FSA is considering allowing bank groups to register as cryptocurrency exchange operators. Permitting highly credible bank groups to participate would create an environment that makes it easier for individual investors to access cryptocurrency markets.
Cryptocurrency trading is expanding across Japan, with accounts exceeding 12 million as of February 2025. This is approximately 3.5 times the number from five years earlier.
Japan became the first major economy to recognize Bitcoin (BTC) as a legal payment method through the 2017 Virtual Currency Act amendments to the Payment Services Act.
The framework required cryptocurrency exchanges to register with the FSA and follow strict security, customer fund protection, and operational transparency rules.
The countryโs early cryptocurrency adoption dates to 2010, when Japanese tech enthusiasts actively mined Bitcoin and traded on early exchanges.
Stablecoin update
Meanwhile, three of Japanโs largest banksโMitsubishi UFJ Financial Group (MUFG), Bank Sumitomo Mitsui Banking Corp. (SMBC), and Mizuho Bankโare collaborating to issue a yen-pegged stablecoin to modernize corporate settlements and lower transaction costs.
The stablecoin will be built on MUFGโs Progmat platform and is expected to be rolled out by the end of the year.
The initiative, according to Nikkei, aims to make the token interoperable for payments within and between companies.
Mitsubishi Corp. will be the first to implement the stablecoin for internal settlements, potentially streamlining international transfers and reducing administrative costs. If successful, the project could launch Japanโs first bank-backed stablecoin network.
Japan is also considering a digital yen through the Bank of Japanโs (BOJ) pilot program, which began in 2023. Since then, the BOJ has been testing a central bank digital currency (CBDC) as part of a broader effort to modernize its economy alongside the evolving digital payments space.
As Japan continues to innovate within the cryptocurrency space, its regulatory framework plays a crucial role in shaping the industryโs growth. While private sector initiatives like the yen-pegged stablecoin project reflect the countryโs push toward adoption, individual investors look to Japanโs FSA for answers on whether theyโll have easier access to cryptocurrency markets.
