On-shore VASP in Japan
Locally-incorporated VASP that operates under full local jurisdiction, holding all required licenses and registrations.
On-shore VASP 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
- CAESP-registered VASPs must implement comprehensive KYC procedures under the Payment Services Act.
- Transaction monitoring and Suspicious Activity Reporting (SAR) obligations apply, aligned with FATF recommendations.
- Travel Rule adopted with JPY 0 threshold — no de minimis exemption; beneficiary VASP information required on all transfers.
- Obligations supervised by the FSA with power to issue administrative orders, penalties, and revoke licenses.
Key Restrictions
- Must be incorporated in Japan as a locally registered entity (CAESP registration).
- Must become a mandatory member of JVCEA (Japan Virtual Currency Exchange Association), the self-regulatory organization.
- Margin trading capped at 2x leverage.
- Token listings pre-screened by JVCEA under green/white list framework.
- Stablecoin intermediation requires separate fund transfer service provider registration; issuance restricted to banks, trust companies, and fund transfer service providers.
- JPY 10M (~$70K USD) minimum capital and must maintain positive net assets at all times.
- 100% cold storage recommended for customer assets; mandatory segregation of customer assets (trust account or equivalent).
- Multi-signature wallets, penetration testing, and internal audits required for cybersecurity.
Key Risks
- Application timeline of 6-18 months creates significant market entry delay and cost exposure.
- FSA has active enforcement powers — history of administrative orders, penalties, and license revocations (e.g., Mt. Gox, Coincheck fallout).
- Individual tax treatment is punitive (up to 55% miscellaneous income); corporate unrealized gains may also be taxed, creating balance-sheet risk.
- Ambiguity around treatment of new crypto product types (DeFi, staking, lending) could lead to regulatory gaps or retroactive enforcement.
- Travel Rule compliance with zero threshold imposes heavy operational burden for every transfer.
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.
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)
Evidence fact jp.tax not found (may have been renamed).
Regulator: Financial Services Agency (FSA).
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 locally-incorporated on-shore VASP is permitted in Japan but must obtain FSA CAESP registration (6-18 month process), maintain JPY 10M minimum capital, join JVCEA, segregate customer assets, comply with AML/CFT obligations including zero-threshold Travel Rule, and adhere to strict operational and cybersecurity requirements.
Questions this verdict aims to answer
- What license(s) are required to operate locally?
- What capital, governance, and reporting obligations apply?
- What is the application process and timeline?