Japan’s FSA Weighs New Registration Rules for Crypto Custodians and Service Providers

Japan’s Financial Services Agency (FSA) is moving to tighten oversight of the country’s digital asset infrastructure, proposing new registration rules for crypto custodians and trading service providers.

Key Takeaways:

• Japan’s FSA plans new registration rules requiring crypto firms to register with regulators before working with exchanges.
• The proposal follows the 2024 DMM Bitcoin hack, which exposed vulnerabilities in outsourced trading management systems.
• The initiative comes amid Japan’s effort to strengthen digital asset security.

A working group under the Financial System Council, an advisory body to the Japanese Prime Minister, met on Nov. 7 to discuss the proposal, according to a report from Nikkei.

Japan Proposes Mandatory Registration for Crypto Custody, Trading Service Providers

The plan would require all third-party custody and trading management firms to register with regulators before offering services to crypto exchanges.

Exchanges, in turn, would be required to use only systems developed by registered entities.

Under Japan’s current framework, crypto exchanges must meet strict requirements for safeguarding deposits, such as storing client assets in cold wallets, but no similar rules apply to external service providers.

Regulators say this has created a security gap, leaving exchanges exposed to theft and system risks.

The issue gained urgency after the DMM Bitcoin hack in 2024, one of Japan’s largest crypto thefts, in which 48.2 billion yen ($312 million) worth of Bitcoin was stolen.

The breach was traced to Ginco, a Tokyo-based software firm that managed DMM’s trading systems, highlighting weaknesses in outsourced service oversight.

Most members of the council’s working group reportedly backed the new registration system, emphasizing the need for clearer regulation in the growing crypto ecosystem.

The FSA intends to compile a formal report and submit proposed amendments to the Financial Instruments and Exchange Act during the 2026 ordinary Diet session.

The initiative comes as Japan’s regulators step up efforts to balance innovation and investor protection.

Last month, the FSA approved the country’s first yen-backed stablecoin, JPYC, and recently confirmed plans to support a stablecoin pilot project with Japan’s three largest banks, Mizuho, MUFG, and SMBC, as part of its broader digital finance agenda.

Japan’s FSA Approves Joint Stablecoin Pilot by Three Major Banks

As reported, Japan’s FSA has approved a joint stablecoin pilot by Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group, marking the first project under its new Payment Innovation Project (PIP).

The regulator said it would support the initiative, which aims to enhance payment efficiency and corporate productivity across Japan’s financial sector.

The three banking giants will develop a shared framework for yen-backed stablecoin issuance, allowing seamless transfers between institutions under unified standards.

The consortium may later introduce a dollar-pegged version to compete with USDT and USDC.

The project will involve Mitsubishi Corporation as a business partner, Progmat for technical infrastructure, and Mitsubishi UFJ Trust and Banking Corporation for trust functions, with pilot testing expected to begin in November 2025.

The move comes as Japan accelerates its stablecoin adoption strategy. The Japan Virtual Currency Exchange Association (JVCEA) recently formalized a framework to self-regulate stablecoins, following the FSA’s approval of the country’s first yen-backed stablecoin, JPYC, last month.

The FSA called the new multi-bank pilot an “innovative effort” that reflects Japan’s growing push to modernize its payments ecosystem.

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