Japan’s Financial Services Agency (FSA) is preparing a two-track reform that could reshape the country’s digital-asset landscape. The regulator plans to let Japan’s banks gain Bitcoin exposure for the first time. Banks would be able to buy, hold, and trade cryptocurrencies under strict supervision.
At the same time, Japanese lawmakers are advancing a ban on crypto insider trading that could take effect by 2026. Together, these initiatives mark the country’s biggest policy shift since crypto exchanges were first licensed in 2017.
Background: From Restriction to Reform
Since 2020, the FSA has allowed banks to work only through licensed crypto exchanges. That restriction was meant to protect retail investors after a series of high-profile breaches.
Now the regulator is rethinking its approach. Japan counts more than 12 million crypto trading accounts, and institutional demand keeps growing. The goal is to build a framework where traditional banks can handle digital assets safely within a regulated environment.
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Reform #1 — Allowing Banks to Hold and Trade Bitcoin
The first reform centers on market access. Under the new proposal, Japan’s banks could expand into Bitcoin trading, buying and holding leading digital assets such as Bitcoin and Ethereum.
The FSA is also considering whether banks or their subsidiaries could register as licensed crypto-exchange operators.
Safeguards would mirror those used in securities markets. These include capital and liquidity requirements, asset segregation, and clear custody rules.
For banks, the change opens new revenue streams from custody, brokerage, and integrated trading services. At the same time, it gives clients confidence through regulated oversight.
Reform #2 — Banning Crypto Insider Trading
In parallel, the government is preparing a legal amendment to extend the Financial Instruments and Exchange Act (FIEA) to crypto. The plan aims to introduce a comprehensive crypto insider trading ban that criminalizes trading based on non-public information, such as token listings or upcoming exchange integrations.
The bill is expected to reach the Diet by 2026. Once passed, it would empower the Securities and Exchange Surveillance Commission (SESC) to investigate misconduct and impose penalties.
This move brings crypto-market conduct closer to traditional securities standards as institutional participation expands.
Liberalization with Oversight
The FSA’s strategy combines opportunity with restraint. Allowing Japan’s banks to participate in Bitcoin markets adds institutional credibility and liquidity.Through the crypto insider trading ban Japan ensures that this openness comes with accountability.
Officials describe the framework as controlled openness: innovation under stricter rules rather than deregulation.
Regional Context and Global Impact
Japan’s reforms arrive amid regional competition. Hong Kong and Singapore already permit limited bank-level crypto services. Tokyo wants to match that pace while maintaining its reputation for investor protection.
Analysts believe that once Japanese banks begin trading or offering custody, other G7 regulators may follow the same model.
Implications for Banks and the Crypto Industry
- Banks in Japan gain a regulated pathway to participate in Bitcoin markets, expand custody offerings, and attract younger retail clients.
- Exchanges could see new partnerships or mergers as financial groups enter the space.
- Investors benefit from better protection, clearer rules, and transparent institutions.
This alignment between access and oversight could redefine how Japan’s financial system engages with digital assets.
What Happens Next
The FSA plans to release a draft outline later in 2025, followed by a consultation process and a Diet vote in 2026. Implementation will depend on feedback from banking associations and the Japan Virtual and Crypto Assets Exchange Association (JVCEA).
Observers expect phased adoption. First custodial services, then full trading authorization once conduct rules are finalized.
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Japan’s new crypto strategy reflects a pragmatic balance. The FSA intends to let Japan’s banks deepen their involvement in Bitcoin within a controlled framework, while enforcing a strong crypto insider trading ban to protect investors.
If both reforms proceed as planned, Japan will pair institutional access with integrity, setting a benchmark for how traditional finance and blockchain can coexist responsibly.
Readers’ frequently asked questions
Which law will include Japan’s crypto insider trading rules?
The Financial Instruments and Exchange Act (FIEA) will be amended to include provisions against crypto insider trading. The amendment will give Japan’s Financial Services Agency and the Securities and Exchange Surveillance Commission clear authority to investigate and penalize misconduct in digital-asset markets.
Are Japanese banks currently allowed to trade or hold Bitcoin?
No. At present, banks in Japan cannot directly hold or trade cryptocurrencies. They can only offer crypto exposure through partnerships with licensed exchanges. The FSA’s ongoing review could change this rule, but no permission has been granted yet.
What agency regulates cryptocurrencies and exchanges in Japan?
The Financial Services Agency oversees Japan’s crypto framework, licensing and supervising exchanges under the JVCEA self-regulatory system. It also drafts and enforces national rules for banks and securities firms dealing with digital assets.
What Is In It For You? Action items you might want to consider
Track bank disclosures on Bitcoin services
Monitor Japanese banks’ investor relations pages and service announcements for updates on Bitcoin custody, brokerage, or exchange-affiliate registrations. Compare fees, custody arrangements, and eligibility requirements before choosing a provider.
Prepare for conduct rules around market-sensitive information
Review internal policies to prevent trading on non-public information (e.g., token listings, exchange integrations). Establish blackout periods, approval workflows, and record-keeping that align with FIEA-style insider-trading controls.
Use regulated venues and verify licensing
When gaining Bitcoin exposure, prioritize regulated channels. Verify that any exchange or bank affiliate is properly licensed under Japan’s framework (JVCEA/FSA) and that client assets are segregated with clear custody terms.
