Japanese FSA mulls new registration rules for cryptocurrency custodians and service providers

Japan’s Financial Services Agency (FSA) is set to strengthen oversight of the country’s digital asset infrastructure, proposing new registration rules for cryptocurrency custodians and trading service providers.

A working group under the Financial System Council, an advisory body to the Japanese prime minister, met on November 7 to discuss the proposal, according to a Nikkei report.

Japan Proposes Mandatory Registration for Cryptocurrency Custody and Trading Service Providers

The plan would require all third-party custody and trading management companies to register with regulators before offering services to crypto exchanges.

Exchanges, in turn, would be required to use only systems developed by registered entities.

Under Japan’s current framework, crypto exchanges must meet strict deposit protection requirements, such as storing customer assets in cold wallets, but no similar rules apply to external service providers.

Regulators say this created a security breach, exposing exchanges to theft and system risks.

The issue became urgent after the 2024 DMM Bitcoin hack, one of the largest crypto thefts in Japan, in which 48.2 billion yen ($312 million) worth of Bitcoin was stolen.

The breach was traced to Ginco, a Tokyo-based software company that managed DMM’s trading systems, highlighting weaknesses in the oversight of outsourced services.

Most members of the council’s working group reportedly supported the new registration system, highlighting the need for clearer regulation in the growing crypto ecosystem.

The FSA intends to draft a formal report and submit proposed amendments to the Financial Instruments and Foreign Exchange Law during the 2026 Diet regular session.

The move comes as Japanese regulators step up efforts to balance innovation and investor protection.

Last month, the FSA approved the country’s first yen-backed stablecoin, JPYC, and recently confirmed plans to support a stablecoin pilot with Japan’s three largest banks, Mizuho, ​​MUFG and SMBC, as part of its broader digital finance program.

Japanese FSA Approves Joint Stablecoin Pilot Project Led by Three Major Banks

As reported, the Japanese FSA has approved a joint stablecoin pilot project by Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group, marking the first project of its new Payments Innovation Project (PIP).

The regulator said it would support the initiative, which aims to improve payment efficiency and business productivity in Japan’s financial sector.

The three banking giants will develop a common framework for issuing yen-backed stablecoins, enabling seamless transfers between institutions under unified standards.

The consortium could later introduce a dollar-pegged version to compete with USDT and USDC.

The project will involve Mitsubishi Corporation as business partner, Progmat for technical infrastructure and Mitsubishi UFJ Trust and Banking Corporation for trust functions, with pilot testing expected to begin in November 2025.

The move comes as Japan accelerates its stablecoin adoption strategy. The Japan Virtual Currency Exchange Association (JVCEA) recently formalized a self-regulatory framework for stablecoins, following the FSA’s approval of the country’s first yen-backed stablecoin, JPYC, last month.

The FSA called the new multi-bank pilot project an “innovative effort” that reflects Japan’s growing desire to modernize its payments ecosystem.

The article Japanese FSA evaluates new registration rules for crypto custodians and service providers appeared first on Cryptonews.

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