Japan’s Financial Services Agency (FSA) is weighing a landmark reform that would let domestic banks buy, hold, trade, and custody Bitcoin and crypto, treating them more like stocks or government bonds under a unified, prudential framework.
The plan, set for discussion at an upcoming Financial Services Council meeting, would also allow banking groups to register as licensed crypto-exchange operators, giving retail and corporate clients direct access to digital assets through their existing banks.
The move marks a sharp pivot from 2020 guidelines that barred banks from investing in crypto due to volatility.
Why It Matters for Banks, Investors, and Japan’s Economy
The reform could normalize crypto inside Japan’s mainstream financial system, opening the door to bank-grade custody, trading, risk management, and compliance.
Expect requirements such as capital charges, exposure caps relative to Tier 1 capital, market-surveillance, AML/CFT controls, Travel Rule adherence, and segregation of client assets.
With over 12 million registered crypto accounts (a 3.5x jump in five years), Japanese demand is already deepening, and bank participation could accelerate that trend by improving trust, convenience, and liquidity.
At the macro level, Japan’s 240% debt-to-GDP backdrop is pushing policymakers to balance innovation with stability.
By enabling regulated access to Bitcoin and other digital assets,alongside the country’s push on yen-pegged stablecoins from Mitsubishi UFJ, Sumitomo Mitsui, and Mizuho, Japan signals a pragmatic path, which is to foster digital-finance growth while keeping systemic risks ring-fenced.
Timeline, Safeguards, and What to Watch Next
Implementation speed will hinge on whether the FSA proceeds via supervisory guideline updates (faster, narrower scope) or Diet legislation (broader, slower). Either way, expect tight exposure limits, stress-testing, and operational-risk standards for custody and exchange functions.
Banks that enter the exchange business will need matching engines, institutional-grade custody, real-time monitoring, and robust KYC/AML tooling, likely catalyzing demand for regtech and market-infra vendors.
Key catalysts:
Final FSA guidance on capital treatment and exposure caps.
Bank exchange registrations and first movers announcing BTC custody/trading.
Progress on crypto’s reclassification as “financial products” (potentially smoothing the path for ETFs and broader securities-law oversight).
Stablecoin rollouts (JPYC, bank-issued yen coins) driving on-chain settlement for corporates.
If enacted, Japan’s plan could make it one of the most bank-integrated crypto markets in the world, providing institutional adoption while embedding crypto inside the country’s well-supervised financial rails.
Cover image from ChatGPT, BTCUSD chart from Tradingview
