Japan is preparing to strengthen oversight of custodial companies in the cryptocurrency sector by requiring them to undergo preliminary registration with the country’s Financial Services Agency (FSA).
This is reported by Business • Media
Regulator’s Initiative Following Major Hack
The Financial Services Agency of Japan is working on implementing a new registration system for companies that store digital assets or manage transactions for cryptocurrency exchanges. These changes are expected to be a response to a serious incident in 2024, when 48.2 billion yen (approximately $312 million) in Bitcoin was stolen from the DMM Bitcoin exchange. Investigators found that hackers gained access through Ginco, a Tokyo-based company that DMM had entrusted with transaction management.
Currently, existing legislation requires cryptocurrency exchanges to adequately protect clients’ assets, particularly by storing them in cold wallets. However, similar requirements do not extend to custodial companies servicing these exchanges, creating additional risks for investors and market participants.
Legislative Changes and New Rules for the Market
The FSA proposes to mandate that all custodial and operational services undergo mandatory registration with the agency, and that cryptocurrency exchanges work exclusively with registered providers. New security standards are also planned to minimize the risks of theft and technical failures in service operations.
“In the case of outsourcing, exchanges have limits to their responsibility” and “it is necessary to clearly define what additional security measures need to be taken.”
As part of this initiative, the Japanese authorities plan to prepare an official report following discussions and amend the law on “Financial Instruments and Exchanges” during the parliamentary session in 2026.
Additionally, the FSA has already announced the establishment of a new bureau to oversee crypto assets, digital finance, and the insurance sector, which will begin operations in the 2026 financial year. This will be part of a strategy to enhance control over the crypto industry and promote the development of innovative financial products. Notably, the agency recently approved Japan’s first yen-backed stablecoin — JPYC, which is already operational on three blockchain networks: Ethereum, Avalanche, and Polygon.
A proposal is also being considered to recognize crypto assets as financial products, which would allow for the launch of crypto ETFs and establish a fixed income tax rate of 20%.