Key Takeaways:
- Japan’s FSA plans registration for crypto management firms to close regulatory gaps.
- New rules follow the $311M DMM Bitcoin hack tied to an external vendor.
- Legal reforms may be introduced in 2026 under the Financial Instruments and Exchange Act.
- The initiative aligns with Japan’s broader stablecoin and crypto innovation agenda.
Japan’s Financial Services Agency (FSA) is preparing a major regulatory shift that could reshape how crypto exchanges and their service providers operate. The agency plans to introduce new rules requiring companies that offer management systems—such as trading platforms or custody tools—to register or give prior notice before partnering with exchanges.
Regulators Target a Key Oversight Gap
The proposal, discussed at a working group meeting on November 7, seeks to close what officials call a growing “regulatory blind spot.” While exchanges must already follow stringent rules—like storing customer funds in cold wallets—external vendors that run parts of their trading infrastructure face fewer checks.
This gap, regulators warn, exposes users to potential security risks. The new system would ensure that only registered service providers handle exchange operations, creating a clear line of accountability in the event of breaches or mismanagement.
Registration To Boost Transparency and Accountability
According to reports, most working group members support the registration framework. A formal list of approved vendors would improve transparency and allow for standardized security requirements across Japan’s crypto sector.
If implemented, the framework would include checks on cybersecurity practices, incident reporting standards, and clearer liability definitions. Industry insiders say such measures could help prevent incidents like the 2024 DMM Bitcoin hack, where $311 million in Bitcoin was stolen due to a vendor system flaw.
Reform Linked to Broader Crypto Strategy
The FSA plans to finalize its recommendations and seek amendments to the Financial Instruments and Exchange Act during the 2026 ordinary Diet session. This gives lawmakers and industry stakeholders time to weigh in on the potential compliance impact—especially for smaller service providers.
Also Read: How to Buy Your First Cryptocurrency
Beyond custody oversight, Japan’s regulators are also nurturing a compliant digital asset ecosystem. The recent approval of JPYC, Japan’s first yen-pegged stablecoin, and support for bank-backed pilot projects highlight the FSA’s dual approach: tighter oversight paired with innovation support.
A Step Toward Stronger Market Confidence
While some vendors fear the added compliance burden, most experts agree the move could restore investor confidence and reduce operational risks. Japan’s latest initiative underscores its goal of setting a global benchmark for crypto regulation—balancing growth with robust consumer protection.
