Japan is preparing a new rule that could significantly change how crypto assets are stored and handled in the country. The Financial Services Agency (FSA) wants any company holding or managing crypto for exchanges to be officially registered with the government. This means every custody or trading-management provider must prove it is secure and compliant before touching user assets.
Why Japan Is Doing This
Crypto exchanges in Japan already have strict rules. They must protect user funds, store most assets in cold wallets, and maintain clear internal controls. But there is a loophole: these rules don’t apply to outside companies that exchanges hire for custody or trading support.
That gap turned into a real problem in 2024. DMM Bitcoin, one of Japan’s major exchanges, was hacked, losing ¥48.2 billion (about $312 million) worth of bitcoin. The hack didn’t happen inside the exchange itself. It originated through a third-party software firm, Ginco, which handled part of the exchange’s trading operations. The incident exposed a major weakness: even if exchanges are secure, an unregulated outside partner can put user funds at risk.
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What the New Rule Would Do
Under the plan, companies providing crypto custody or trading services must register with authorities before operating. Exchanges will only be allowed to use custodians that appear on the government’s approved list. In short, if a provider is touching user assets in any way, it must meet the same security standards as the exchange itself.
Members of Japan’s Financial System Council, which advises the Prime Minister, discussed the proposal on November 7. According to reports from Nikkei, most members supported the change. The FSA plans to turn these discussions into a formal proposal and aims to submit amendments to existing financial laws during the 2026 parliamentary session.
What It Means for Crypto Users
The rule comes at the same time Japan is actively pushing forward new crypto and blockchain initiatives. The FSA recently approved Japan’s first yen-backed stablecoin, JPYC, and is supporting a stablecoin pilot involving Japan’s three major banks, Mizuho, MUFG, and SMBC. These projects show that Japan wants to lead in digital finance, but without compromising safety. For everyday crypto holders, this move means more protection. Exchanges won’t be able to outsource critical operations to unknown or poorly secured companies. Everything touching user assets would require government oversight and registration.
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FAQs
Japan requires all companies managing crypto for exchanges to register with the government, ensuring security and compliance.
A 2024 hack exposed risks from unregulated third-party firms, prompting stricter oversight to protect user funds.
Exchanges can only use registered custodians, ensuring all partners meet the same security standards as the exchange itself.
Yes, it prevents exchanges from outsourcing key operations to unverified companies, adding a layer of government oversight.
The FSA plans to submit legal amendments in 2026, with registration requirements likely enforced after parliamentary approval.
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