Japan Tightens Crypto Rules, Pilots Stablecoins to Balance Innovation and Investor Trust

Japan's Financial Services Agency (FSA) and the Japan Exchange Group (JPX) are taking coordinated steps to address risks posed by cryptocurrency hoarding and insecure management systems, as regulators seek to balance innovation with investor protection. The FSA is advancing a prior notification system for crypto asset management providers, while JPX explores curbs on listed companies accumulating digital assets to prevent governance and market stability issues, according to a Coinotag report.

The FSA's proposed system requires companies offering crypto management tools to seek prior approval, targeting vulnerabilities exposed by incidents like the May 2024 DMM Bitcoin hack, which resulted in a $312 million loss, as reported by the Coinotag report. The hack, traced to Tokyo-based software firm Ginco, highlighted systemic weaknesses in outsourcing critical operations to non-regulated entities, according to the Cryptopolitan article. Under the new framework, providers would need to comply with security standards such as cold wallet storage, and exchanges would be restricted to using tools from registered vendors, per the Coinotag report. Most members of the Financial System Council's working group endorsed the plan, which could be integrated into the Financial Instruments and Exchange Act by 2026, as noted in the Cryptopolitan article.

Parallel to these efforts, the FSA is piloting stablecoin initiatives with major banks like Mizuho, MUFG, and SMBC to test blockchain-based payments, as covered by the Coinotag report. The project, part of the Payment Innovation Project (PIP), aims to confirm legal compliance and operational feasibility for fiat-backed tokens, with results to be published in 2026, as reported by the Cryptopolitan article. This aligns with Japan's broader push to modernize its financial system, following the approval of JPYC, the country's first yen-pegged stablecoin, in October 2025, as reported in a Bitcoinist article.

Meanwhile, JPX is considering stricter rules to limit the growth of listed digital-asset treasury companies (DATs), which have seen sharp declines in value after initial surges, as noted in the Bloomberg article. Three companies have suspended crypto-buying plans since September due to regulatory pushback, with warnings that treating crypto accumulation as a core business could restrict fundraising capabilities, according to the Bloomberg article. While JPX has no explicit ban on crypto holdings, it is monitoring firms for governance risks and investor protection concerns, as covered by the Bloomberg article. This follows a global trend: Hong Kong and other Asia-Pacific exchanges have resisted DATs, while Japan now hosts 14 listed Bitcoin buyers, the most in Asia, according to the Bloomberg article.

The regulatory moves come amid growing scrutiny of stablecoins globally. South Korea's Financial Services Commission (FSC) has urged caution, citing risks like capital flight and monetary policy challenges, while acknowledging the need to align with U.S. and Japanese progress, as reported in a Yahoo Finance article. Japan's FSA, however, emphasizes that stablecoins must be implemented "lawfully and appropriately" to avoid undermining traditional banking systems, as reported in a CryptoNews piece.

Experts stress the importance of preemptive oversight. An anonymous FSA advisor noted, "Enhancing pre-approval processes is essential to safeguard user funds and maintain market integrity," as reported in the Coinotag report. The combined approach of tightening management rules and testing stablecoin applications reflects Japan's strategy to foster innovation without sacrificing stability—a model observers say could influence global crypto governance, as noted in the Coinotag report and the Cryptopolitan article.

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