Japan’s Financial Services Agency (FSA) is preparing significant regulatory changes that could permit domestic banks to buy, hold, and trade bitcoin for the first time.
If approved, this would mark a historic shift in Japan’s approach to digital asset integration within mainstream finance.
FSA proposal and regulatory shift
The FSA’s plan, currently under review by the Financial Services Council, aims to treat bitcoin like established financial instruments such as stocks and government bonds.
This would allow banks to handle bitcoin in a manner similar to securities, aligning digital assets with the conventional financial system.
Under current rules, banks in Japan are barred from holding digital assets for investment, a restriction imposed in 2020 due to concerns over volatility.
Strict risk management required
To address these volatility risks, the FSA will require participating banks to adhere to strict capital and exposure limits, along with mandatory stress testing for their bitcoin holdings.
The regulator emphasized the importance of a robust risk management framework to prevent potential instability from large price swings.
The FSA stated that upcoming working group meetings will focus on managing the unique risks associated with digital asset exposure.
Banks may operate bitcoin exchanges
The proposal also opens the door for banks to register as official bitcoin exchange operators.
Currently, only licensed digital asset firms can provide trading and custody services, and banks must set up separate subsidiaries to participate.
If the changes proceed, banks could offer bitcoin trading services directly to customers, potentially increasing trust and safety in the market due to enhanced compliance and security standards.
Oversight and investor protection
The FSA is considering shifting oversight of digital assets from the Payments Services Act to the Financial Instruments and Exchange Act (FIEA), which covers securities.
The regulator notes that digital assets share many challenges with traditional securities, suggesting that similar investor protection rules may be applied.
