Japan Strengthens Cryptocurrency Regulations and Tests Stablecoins to Foster Innovation While Ensuring Investor Confidence

Japan’s Financial Services Agency (FSA) and the Japan Exchange Group (JPX) are working together to tackle the dangers linked to excessive cryptocurrency accumulation and weak management systems, as authorities aim to encourage innovation while safeguarding investors. The FSA is moving forward with a system that requires advance notification from crypto asset management firms, and JPX is considering restrictions on listed companies amassing digital assets to avoid governance and market stability problems, according to a

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The FSA’s plan would make it mandatory for businesses providing crypto management solutions to obtain approval in advance, addressing weaknesses revealed by incidents such as the DMM

breach in May 2024, which led to a $312 million loss, as detailed in the . The attack, traced to Tokyo-based Ginco, exposed systemic flaws in outsourcing vital operations to unregulated firms, according to the . Under the proposed rules, providers would need to meet security requirements like cold wallet usage, and exchanges could only use tools from approved vendors, as stated in the . Most members of the Financial System Council’s working group supported the initiative, which may be incorporated into the Financial Instruments and Exchange Act by 2026, as mentioned in the .

At the same time, the FSA is running stablecoin trials with leading banks such as Mizuho, MUFG, and SMBC to

blockchain-based payment systems, as reported by the . This initiative, part of the Payment Innovation Project (PIP), is designed to verify both legal compliance and practical operation for fiat-backed tokens, with findings expected to be released in 2026, according to the . These efforts are in line with Japan’s broader strategy to upgrade its financial infrastructure, following the approval of JPYC, the nation’s first yen-backed stablecoin, in October 2025, as noted in a .

Meanwhile, JPX is weighing tighter regulations to curb the expansion of publicly traded digital-asset treasury companies (DATs), which have experienced steep value drops after initial growth, as highlighted in the

. Since September, three firms have halted plans to acquire more crypto due to regulatory concerns, with warnings that making crypto accumulation a main business could limit their ability to raise funds, according to the . Although JPX does not outright prohibit crypto holdings, it is keeping a close eye on companies for governance and investor protection risks, as described in the . This mirrors a global pattern: exchanges in Hong Kong and other Asia-Pacific regions have resisted DATs, while Japan now leads Asia with 14 listed Bitcoin-holding companies, according to the .

These regulatory actions come as stablecoins face increasing scrutiny worldwide. South Korea’s Financial Services Commission (FSC) has advised caution, pointing to risks such as capital outflows and challenges to monetary policy, while also recognizing the importance of keeping pace with developments in the U.S. and Japan, as reported in a

. Japan’s FSA, on the other hand, insists that stablecoins must be introduced “legally and properly” to avoid disrupting the traditional banking sector, as stated in a .

Industry specialists emphasize the need for proactive regulation. An unnamed FSA advisor remarked, “Strengthening pre-approval requirements is vital for protecting user assets and ensuring market stability,” as referenced in the

. Japan’s dual approach—tightening oversight and piloting stablecoin use—demonstrates its commitment to encouraging innovation while maintaining stability, a strategy that observers believe could shape international crypto regulation, as discussed in the and the .

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