Japan's Financial Services Agency (FSA) is considering a proposal that would allow banks to hold Bitcoin and other cryptocurrencies. This move could significantly alter Japan's digital asset landscape, potentially encouraging institutional involvement and increasing retail investor confidence in the crypto market.
The FSA's potential decision reflects a broader trend toward crypto normalization in Japan. The agency has already proposed a landmark reform to reclassify cryptocurrencies under the Financial Instruments and Exchange Act. This reclassification could pave the way for legal Bitcoin ETFs in Japan and dramatically reduce the tax burden on crypto gains. Currently, Japanese residents face a tax rate of up to 55% on crypto gains, but the FSA's proposal suggests replacing this with a flat 20% capital gains tax, aligning it with traditional stock and ETF investments.
In April 2025, the FSA released a discussion paper titled "Examining the Structure of Regulatory Frameworks Related to Crypto Assets". The paper highlights key issues such as regulatory oversight, transparency, insider trading prevention, and industry-specific regulations. It also proposes classifying crypto assets into two categories: Type 1 for fundraising purposes and Type 2 for assets like Bitcoin and Ethereum not linked to fundraising. The FSA aims to bridge the information gap for Type 1 assets, but faces challenges in linking Type 2 assets to specific issuers, complicating the enforcement of disclosure rules.
The FSA also plans to introduce a crypto bill by 2026 to classify cryptocurrencies under traditional securities laws and subject them to insider trading regulations. Currently, insider trading laws in Japan do not cover cryptocurrencies, leaving a significant loophole. The proposed regulations aim to bring digital assets under the same strict standards as traditional finance. These efforts are expected to be finalized by the end of 2025 and submitted for parliamentary approval shortly afterward.
These regulatory changes come as cryptocurrency adoption in Japan surges. More than 12.4 million adults, about 15% of the population, already hold cryptocurrencies, and that number is projected to rise to 19.4 million by the end of 2025. This rapid expansion has increased the urgency for a strong, transparent crypto regulatory framework.
In a related development, Japan's three largest banks – Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group – are planning to jointly issue stablecoins pegged to the Japanese yen. This initiative aims to improve settlement efficiency and support the adoption of blockchain technology.
A recent survey by Nomura Holdings and Laser Digital found that over half of Japanese institutional investors plan to invest in digital assets within the next three years. Many view digital assets as a diversification opportunity, with typical allocations of 2–5% of assets under management.
The FSA's reforms are designed to balance crypto innovation with investor protection, positioning Japan as a global leader in regulated digital finance. By establishing a Crypto Bureau in 2026, the FSA aims to reinforce oversight of Web3 and tokenized assets while addressing risks in decentralized finance and NFTs. This proactive approach positions Japan to compete with other markets fostering crypto growth through flexible licensing frameworks.
