Japan Considers Mandatory Registration for Crypto Custody System Providers

Quick Breakdown 

• The new proposal requires crypto system providers to register, limiting use to approved platforms.
• The measure follows the 2024 DMM Bitcoin hack, highlighting the risks of outsourced management.
• FSA aims to submit law amendments in 2026 to boost investor protection and market confidence.

 

Japan’s Financial Services Agency (FSA) is exploring a new regulatory framework that would require providers of cryptocurrency management systems to register in advance. The proposal was discussed on November 7 at a working group under the Financial System Council, an advisory body to the prime minister.

Japan’s Financial Services Agency (FSA) is considering introducing a new framework that would require crypto asset custody and trading management service providers to register with the regulator before offering services to cryptocurrency exchanges. The proposed rules would also…

— Wu Blockchain (@WuBlockchain) November 10, 2025

Enhancing security after major crypto incidents

Current Japanese law requires crypto exchanges to maintain robust management systems, including storing customer assets in offline “cold wallets.” However, companies that provide the software and infrastructure for exchanges have not been subject to direct regulation. Under the proposed framework, only registered system providers would be authorized for use by exchanges, introducing an additional layer of oversight.

The initiative follows significant incidents, including the 2024 hack of DMM Bitcoin, which resulted in the loss of approximately 48.2 billion yen worth of Bitcoin. DMM had outsourced its transaction management to Ginco, a Tokyo-based software company, which hackers targeted. The incident highlighted vulnerabilities when exchanges rely on external technology providers without direct regulatory oversight.

Regulatory consensus and next steps

At the working group, most committee members expressed support for the registration system, emphasizing the need for clarity on additional measures when exchanges outsource operations. Concerns were raised that responsibility for external systems can be limited, making accountability more complex.

The FSA plans to compile a report based on these discussions and aims to submit amendments to the Financial Instruments and Exchange Act during the 2026 ordinary session of the Diet. The proposed changes aim to prevent future losses, enhance investor protection, and bolster confidence in Japan’s cryptocurrency market.

If implemented, the registration requirement would make Japan one of the first countries to directly regulate the providers of crypto custody and management systems, ensuring that critical infrastructure supporting digital asset trading meets robust security and operational standards.

This follows private consultations with experts as the agency reassesses its approach to crypto regulation. As global regulatory trends evolve, the FSA will consider public feedback and international developments before finalizing Japan’s new crypto framework.

 

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