Japan weighs tighter crypto custody, trading rules: report
- ByStartupStory | November 11, 2025
Japan’s Financial Services Agency (FSA) is planning to tighten regulations on cryptocurrency custody and trading service providers starting from 2026. The proposed rules will require all third-party digital asset custody providers and trading system operators to formally register with the regulator before servicing or partnering with crypto exchanges. This step aims to close security vulnerabilities exposed by incidents such as the 2024 DMM Bitcoin hack, which compromised $312 million worth of Bitcoin through an unregulated third-party trading system provider.
Currently, while crypto exchanges in Japan face strict requirements for storing client assets, no such regulatory oversight applies to external custodians or trading service vendors. The new rules would extend the regulatory perimeter to these service providers to ensure standardized security, operational accountability, and protection of user assets.
The FSA’s initiative has received broad backing from a working group under the Financial System Council, which advises the Japanese Prime Minister. Japan is expected to formalize the regulatory framework and submit amendments to the Financial Instruments and Exchange Act during the 2026 parliamentary session.
The move is part of Japan’s broader effort to balance innovation in digital assets with investor protection and market integrity. It follows other advances such as Japan’s approval of its first yen-backed stablecoin and a multi-bank stablecoin pilot project aimed at modernizing the payments ecosystem.
This tighter regulatory environment will require crypto firms and service providers to enhance compliance capabilities and may serve as a model for global crypto regulation standards.
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