Policy Shift Towards Cryptocurrency Investment for Banks
Japan's Financial Services Agency (FSA) is preparing to review regulations that would permit banks to acquire and hold cryptocurrencies, including Bitcoin, for investment purposes. This reform represents a major policy shift for the nation's banking sector.
Current supervisory guidelines, revised in 2020, effectively prohibit banks from holding crypto due to volatility concerns. The FSA plans to discuss the proposed reforms at an upcoming Financial Services Council meeting, which serves as an advisory body to the Prime Minister.
Framework for Risk Management and Asset Holding
The initiative aims to align cryptocurrency asset management with traditional financial products like stocks and government bonds. Regulators are expected to establish frameworks for managing crypto-related risks, particularly sharp price fluctuations that could impact banks' financial health.
The FSA will likely impose capital and risk-management requirements before permitting banks to hold digital assets. Officials have raised concerns that banks holding substantial cryptocurrency amounts could face significant losses during sudden price drops, potentially endangering their financial stability.
Expanding Services and Market Growth
The agency is also considering allowing bank groups to register as licensed cryptocurrency exchange operators. This designation would enable them to offer trading and custody services directly to customers, expanding beyond current restrictions.
Japan's crypto market has experienced rapid growth, with more than 12 million cryptocurrency accounts registered as of February 2025. This figure represents approximately 3.5 times the number recorded five years earlier, demonstrating accelerating adoption.
Regulatory Alignment and Future Legislation
At the start of September, the FSA sought to place crypto regulation under the Financial Instruments and Exchange Act, shifting oversight from the Payments Services Act. The move aims to strengthen investor protection and align cryptocurrency with securities laws. The regulator noted that many issues within crypto resemble those traditionally addressed under the FIEA, making similar mechanisms and enforcement appropriate.
The FSA plans to establish a new Crypto Bureau next year to address future cryptocurrency-related issues. The agency is also preparing to present a bill to Parliament in 2026 targeting insider trading in cryptocurrency markets.
Insider trading involves market participants executing trades using confidential information not available to the public. This practice is illegal in Japan, and the proposed bill would introduce legal changes affecting everything from Bitcoin to meme coins.
Institutional Interest and Industry Collaboration
Three of Japan's largest banks, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corp, and Mizuho Bank, have already joined forces to issue a yen-pegged stablecoin. The project aims to streamline corporate settlements and reduce transaction costs, indicating growing institutional interest in digital assets.
Conclusion
The FSA's regulatory review and planned reforms position Japan to strengthen its role in the global cryptocurrency ecosystem while maintaining financial stability protections for its banking sector.