Japan’s FSA Regulation Shift Could Boost Institutional Adoption

Japan's Financial Services Agency (FSA) is preparing to take new radical steps on regulation to allow banks to hold and invest in cryptocurrencies like Bitcoin. This is a crucial policy shift of the traditionally conservative position of Japan in digital assets and a sign of growing institutional confidence in crypto as a conventional investment portfolio.

Banks Could Hold Bitcoin Under New Rules

Under the presented structure, banks would be allowed to purchase and hold digital assets under their investment portfolio. This would place cryptocurrencies in line with traditional investments such as stocks and government bonds. Also, Japan's financial system will be modernized through the reforms, ensuring that the system is in touch with the changing global market and increasing demand to integrate digital finance.

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Furthermore, the move by FSA comes at a time when cryptocurrencies are surging within the country. Statistics indicate that over 12 million active accounts in Japan had been registered in crypto by February 2025, more than 3x the number five years ago. This development has raised questions among regulators as to how conventional financial institutions can seamlessly interact with the digital asset industry without causing market instability.

To mitigate the risks involved, the FSA is expected to come up with stringent rules regarding asset custody, exposure to volatility, and liquidity management. These are aimed at making sure that, as banks gain access to this developing market in cryptocurrency, they also meet prudential demands, as with other financial assets. The reforms will be mentioned in the next Financial System Council, which is an advisory body to the Prime Minister.

Crypto Exchanges To Be Run By Banks

In addition to holding cryptocurrencies, the FSA is also considering to allow banking groups to register as exchange operators. The move has the potential to transform the landscape of the crypto sector in Japan as it will be part of the established banking system. Consequently, investors can gain access to a higher level of transparency, security, and trust, which are some of the key issues that have long hindered increased involvement in the market.

Approved, these reforms would put Japan among the first high-ranking economies that officially allow banks to directly work with cryptocurrencies in regulated terms. This would encourage other jurisdictions to do the same, particularly across institutions that are already under increasing pressure to buy Bitcoin and other digital currencies in the world.

The evolving position of crypto in the country recognizes the growing influence of crypto assets in the financial sector. Japan is the center of digital transformation of regulations in the economy, with the integration of old banking and blockchain innovations.