20-2-2025 – Japan’s financial watchdog is poised to implement sweeping reforms to its cryptocurrency regulations, potentially easing restrictions on crypto brokerages and updating stablecoin oversight in a bid to revitalise the nation’s digital asset sector.
The Financial Services Agency (FSA) has endorsed recommendations from its specialist working group that could fundamentally alter how crypto businesses operate in the world’s third-largest economy.
Under current regulations, crypto brokerages must obtain the same stringent virtual asset service provider (VASP) licences as full-scale exchanges, a requirement that has significantly limited market entry. The proposed reforms would create a new “intermediary” classification for brokerages, introducing streamlined compliance requirements that better reflect their role as market facilitators rather than direct asset custodians.
“This reform could open the floodgates for new market participants, particularly from the gaming and digital wallet sectors”, says Dr Hiroshi Tanaka, a financial technology researcher at Waseda University. “The current regulatory framework has been overly restrictive for businesses that don’t actually hold customer assets”.
The working group has also recommended significant changes to stablecoin regulation, proposing that issuers be permitted to use short-term government bonds and fixed-term deposits as collateral, up to 50% of their reserves. This marks a departure from the current system, which requires pure fiat backing.
The reforms appear designed to address criticism that Japan’s strict regulatory environment has driven innovation offshore. Several prominent Japanese blockchain gaming and Web3 companies have relocated to more accommodating jurisdictions in recent years.
Finance Minister Katsunobu Kato’s recent comments suggest government support for the changes, emphasising the need for “highly convenient” digital payment services that maintain robust consumer protections.
The proposals also include measures to prevent a repeat of the FTX collapse, which left Japanese customers waiting two years to recover their funds. New mechanisms would ensure domestic users’ assets remain accessible even if an overseas parent company declares bankruptcy.
The FSA is expected to proceed with amendments to the Trust Business Act and Payment Services Act to implement these changes. The reforms come as major Japanese corporations increasingly explore stablecoin initiatives, mirroring the global surge in digital asset adoption during the current bull market.
Industry observers anticipate these changes could herald a new era for Japan’s crypto sector, potentially repositioning the country as a more competitive player in the global digital asset landscape.
