Japan’s Financial Services Agency (FSA) is preparing a major reform that could transform how traditional banks approach cryptocurrencies. According to Livedoor News, the FSA plans to revise current rules and allow banks to hold cryptocurrencies – including bitcoin – as investment assets.

A turning point for digital assets

Under current 2020 legislation, banks are practically banned from holding cryptocurrencies due to concerns about volatility and financial stability risks. The proposed reform could change that. The FSA intends to discuss the topic at an upcoming meeting of the Financial Services Council, an advisory body to the Japanese prime minister.

The goal is to align the management of crypto assets with traditional investment products such as stocks and government bonds. If approved, Japanese banks could become key players in the digital asset market – not only as investors but also as service providers.

Strict risk management framework

Before permitting banks to hold cryptocurrencies, the FSA plans to establish strict risk management requirements. The regulator wants to prevent sharp price swings in bitcoin or other cryptocurrencies from threatening the financial health of institutions. Banks would need to meet new capital and risk management standards.

Banks could run their own exchanges

The proposal also includes the option for banking groups to obtain licenses to operate crypto exchanges. This would enable them to offer clients direct trading and custody of digital assets without intermediaries.

According to FSA data, Japan’s crypto market continues to grow rapidly. As of February 2025, there were over 12 million registered cryptocurrency accounts – roughly 3.5 times more than five years ago.

Regulation aligning with traditional securities

Japan is also preparing to move cryptocurrency oversight under the Financial Instruments and Exchange Act (FIEA). Until now, crypto assets were regulated under the Payments Services Act, which offered a looser framework. The shift to FIEA aims to strengthen investor protection and bring crypto closer in line with traditional financial instruments.

Major banks developing a stablecoin

The reforms come as Japan’s three largest banks – Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corp. (SMBC), and Mizuho Bank – have announced plans to issue a stablecoin pegged to the Japanese yen. The goal is to simplify corporate settlements and reduce transaction costs.

A new era for the crypto market

If the reform passes, Japan could become one of the first developed economies where cryptocurrencies are fully integrated into the banking sector. This move would not only strengthen the legitimacy of digital assets but also accelerate adoption among retail and corporate investors.

Sources:

https://news.livedoor.com/article/detail/29807537/?utm_source=chatgpt.com

https://www.fsa.go.jp/singi/singi_kinyu/angoshisanseido_wg/gijishidai/20250902/05.pdf

https://cointelegraph.com/news/japan-fsa-may-let-banks-hold-bitcoin-crypto-assets