Japan -- Regulatory Status Regulatory Overview

Cryptocurrency is legal and comprehensively regulated in Japan under a detailed regulatory framework designed to protect consumers and ensure market stability.[1]

Regulatory Approach

Japan employs a comprehensive regulatory framework for cryptocurrencies rather than a ban or minimal approach.[1][3] The regulatory strategy focuses on consumer protection, anti-money laundering compliance, and investor safeguards while allowing legitimate cryptocurrency exchange operations.[1]

Primary Regulatory Bodies

• Financial Services Agency (FSA): The main regulator responsible for registering and supervising crypto-asset exchange providers, developing the legal framework, and enforcing anti-money laundering rules.[1]
• Japan Virtual and Crypto Assets Exchange Association (JVCEA): A self-regulatory organization that sets compliance rules for member exchanges, including pre-approval of new crypto assets before listing.[1]

Key Legislation

Payment Services Act (PSA) – Originally enacted in 2017 with significant revisions, the PSA defines digital currencies as "Crypto Assets" and mandates that any business providing exchange services must register with the FSA.[1][3] The PSA amendments serve three primary purposes: protecting users against exchange hacks, creating a transparent regulatory framework, and limiting margin trading of crypto derivatives.[3]

Financial Instruments and Exchange Act (FIEA) – Governs tokens with investment-like features, such as security tokens and ICO tokens, which are explicitly classified as type 2 securities and subject to more stringent regulations.[1][3]

Recent developments include a Cabinet-approved bill in 2025 to officially classify cryptocurrencies as financial instruments, introducing stricter oversight including bans on insider trading and mandatory annual disclosures.[2][6]

Stance on Crypto Trading and Exchanges

Crypto trading is legal and permitted through regulated exchanges.[1] Key regulatory requirements for exchanges and traders include:

• Exchanges must register with the FSA to obtain operating licenses[3]
• Customer due diligence procedures and detailed record-keeping are mandatory[3]
• At least 95% of user assets must be kept in offline cold wallets (cold storage requirements)[1]
• Customer funds must be segregated from exchange operating capital[1]
• Strict anti-money laundering (AML) and know-your-customer (KYC) compliance is required[3]
• New crypto assets must undergo internal assessment and pre-approval by the JVCEA before listing[4]

The regulatory framework is continuously evolving, with the Cabinet Office considering reclassification of crypto assets as financial assets and a more lenient tax regime as of 2025.[4]