Centralized exchange in Japan
Order-book exchange that takes custody of user assets and matches trades between users.
CEX is conditionally permitted in Japan with a local entity, subject to AML obligations and high licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- High
- Last updated
- 2026-07-13
AML Obligations
- Comprehensive KYC/AML procedures required under PSA and FIEA, aligned with FATF recommendations (jp.licensing.anti-money-laundering-aml-counter-terrorist-financing)
- Transaction monitoring and suspicious activity reporting (SAR) to FSA (jp.licensing.anti-money-laundering-aml-counter-terrorist-financing)
- Travel Rule applies at JPY 0 threshold — no minimum; full originator/beneficiary information required on all withdrawals and transfers (jp.travel-rule.status, jp.travel-rule.fsa-announcement-and-implementation-httpswwwsygnaioblogjapan-implements-fatfs-crypto-travel-rule1)
- Customer due diligence (CDD) / KYC on all customers (jp.licensing.anti-money-laundering-aml-counter-terrorist-financing)
Key Restrictions
- Must obtain CAESP registration from FSA (6–18 month application timeline) (jp.licensing.vasp, jp.licensing.exchange)
- Mandatory membership in JVCEA (self-regulatory organization) (jp.licensing.vasp, jp.licensing.regulator-jvcea)
- Token listings must be pre-screened by JVCEA (green/white list standards) (jp.licensing.regulator-jvcea, jp.licensing.vasp)
- Margin trading capped at 2x leverage (jp.licensing.exchange)
- Stablecoin intermediation requires separate fund transfer service provider registration (jp.licensing.exchange)
- JPY 10M (~$70K USD) minimum capital; must maintain positive net assets (jp.licensing.vasp)
- Customer crypto-assets must be segregated in trust accounts or equivalent; cold storage recommended for majority (jp.licensing.vasp, jp.licensing.custody, jp.licensing.segregation-of-customer-assets-vceps)
- Multi-signature wallets, penetration testing, and internal audits required (jp.licensing.custody, jp.licensing.robust-security-measures-strict-requirements)
Key Risks
- Long licensing timeline (6–18 months) creates market-entry delay (jp.licensing.vasp)
- High regulatory scrutiny from FSA with power to revoke licenses and issue administrative orders (jp.licensing.supervision-and-enforcement-the-fsa)
- JVCEA green/white list process restricts which tokens can be listed, limiting product flexibility (jp.licensing.regulator-jvcea)
- Stablecoin Law (June 2023) restricts issuance to banks/trusts — exchanges can only intermediate via separate fund transfer service registration (jp.licensing.legislation-stablecoin-law-effective-june-2023, jp.licensing.exchange)
- Travel Rule at JPY 0 threshold imposes significant operational burden for all withdrawal flows (jp.travel-rule.status)
- Enforcement and tax scrutiny from both FSA and NTA (jp.enforcement.regulator-national-tax-agency-nta)
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
FSA/JFSA — CAESP registration, exchange oversight, stablecoin regulation, policy development
JVCEA — Mandatory self-regulatory organization — token listing standards (green/white list), operational rules, member monitoring
Payment Services Act (amended 2017, 2020) (2017) — CAESP registration, crypto-asset definition, customer asset segregation
Financial Instruments and Exchange Act (amended 2020) (2020) — Security tokens (electronically recorded transferable rights), crypto derivatives — Type I FIB license
VASP: CAESP registration with FSA. JPY 10M (~$70K USD) minimum capital. Must maintain positive net assets. 100% cold storage recommended for customer assets. JVCEA membership mandatory. 6-18 month application timeline. Token listings pre-screened by JVCEA.
CUSTODY: Included under CAESP registration. Mandatory segregation of customer assets (trust account or equivalent). Multi-signature wallets, penetration testing, internal audits required.
EXCHANGE: CAESP registration required. Margin trading capped at 2x leverage. Stablecoin intermediation requires separate fund transfer service provider registration.
Licensing and Registration: All crypto-asset exchange service providers (VCEPs) must be licensed and registered with the FSA. This is a rigorous process.
Supervision and Enforcement: The FSA supervises licensed exchanges to ensure compliance with the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA), and other relevant regulations. It has the power to issue administrative orders, impose penalties, and even revoke licenses.
Definition of Crypto-Assets: Legally defines crypto-assets as property values that can be used for payment to unspecified persons, can be bought/sold, and can be transferred electronically.
Licensing Requirement: Mandates that all entities operating "Crypto-Asset Exchange Services" (which include buying/selling, exchanging, intermediating, managing, or transferring crypto-assets for others) must register with and obtain a license from the FSA.
Segregation of Customer Assets: VCEPs must segregate customer crypto-assets from their own assets. Cold wallets are preferred for a significant portion of customer holdings.
Robust Security Measures: Strict requirements for cybersecurity, including multi-signature wallets, penetration testing, and internal audits.
Anti-Money Laundering (AML) & Counter-Terrorist Financing (CFT): Comprehensive Know Your Customer (KYC) procedures, transaction monitoring, and suspicious activity reporting (SAR) obligations. These align with FATF recommendations.
Travel Rule adopted — threshold: JPY 0 (no threshold)
FSA announcement and implementation: https://www.sygna.io/blog/japan-implements-fatfs-crypto-travel-rule/; https://www.fsa.go.jp/en/news/2025/20250625/01.pdf
Regulator: Financial Services Agency (FSA).
Regulator: National Tax Agency (NTA).
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- high
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — a centralized exchange can operate in Japan only after obtaining CAESP registration from the FSA (~6–18 months), joining JVCEA as a mandatory SRO member, segregating customer assets, complying with the Travel Rule at JPY 0 threshold, and adhering to strict capital, security, and token-listing requirements.
Questions this verdict aims to answer
- What exchange / VASP license applies?
- What custody segregation rules apply to user assets?
- What market-conduct and listing rules apply?
- What travel-rule obligations apply on withdrawals?