The Financial Services Agency of Japan (FSA) is preparing to strengthen regulations in the digital asset market by introducing mandatory pre-registration for custodial companies that provide cryptocurrency storage services or manage transactions for exchanges. These initiatives are a response to the increasing security risks in the industry and a series of high-profile cryptocurrency theft incidents.
This is reported by Finway
Proposed Legislative Changes and New Requirements
Currently, the Financial Instruments and Exchange Act in Japan requires crypto exchanges to responsibly store client assets, including the use of cold wallets that are not connected to the Internet. At the same time, companies servicing these exchanges as custodial or operational services are not subject to similar requirements, creating potential vulnerabilities.
The FSA plans to require all companies that handle storage or transaction management for crypto exchanges to register with the agency. Additionally, crypto exchanges will only be able to work with registered service providers, preventing collaboration with unlicensed market players.
“In the case of outsourcing, exchanges have limits to their responsibility” and that “it is necessary to clearly define what additional security measures need to be taken.”
Relevant changes to the law are expected to be presented to parliament in 2026. The FSA is already working on preparing an official report based on discussions with a working group at the Financial Council of the system.
Reasons for Increased Oversight and Further Steps by the Regulator
The FSA’s initiative is a direct response to a massive hacking attack in 2024, when 48.2 billion yen (approximately $312 million) in Bitcoin was stolen from the DMM Bitcoin exchange. Investigations revealed that the hackers gained access through the company Ginco, to which DMM had delegated transaction management.
As part of the expanded oversight, the Japanese regulator also announced the establishment of a new bureau that will oversee cryptocurrency assets, digital finance, and the insurance sector starting from the 2026 financial year. The measures introduced are part of a comprehensive policy by the agency to enhance supervision of the crypto industry and minimize technical and financial risks for users.
Furthermore, the FSA is developing additional initiatives to promote digital finance in the country. In particular, the agency has proposed recognizing cryptocurrencies as financial products, which could theoretically pave the way for the launch of crypto ETFs and the introduction of a fixed income tax rate of 20% on profits from digital assets.
It is important to note that recently, the FSA has been focusing on supporting local stablecoin projects. In October, the agency approved the first Japanese stablecoin backed by yen — JPYC, which is already operational on three blockchain networks: Ethereum, Avalanche, and Polygon.