Crypto Regulation in Japan May Soften to Allow Bank Participation

TLDR

• Japan’s Financial Services Agency is preparing to allow bank-affiliated securities firms to offer crypto trading services.
• The regulator is reviewing a ban that currently stops banks from investing directly in digital assets.
• This move could bring traditional banks into a space previously dominated by fintech companies and securities firms.
• Japan legalized crypto exchanges in 2017 and is now rethinking its crypto regulation policies.
• The proposed changes aim to treat crypto assets similarly to stocks and bonds in terms of trading and holding.

Japan is moving closer to approving crypto trading services for traditional banks. The Financial Services Agency (FSA) is preparing a key decision. This policy shift could reshape the nation’s tightly regulated digital asset industry.

Crypto Regulation Shift Gains Momentum

The FSA may soon allow banking group subsidiaries to register as crypto asset service providers. Current regulations under the Banking Act prevent such activities. However, Japan’s financial regulator plans to revise this restriction to include securities units.

This revision would enable banking subsidiaries to compete with firms like SBI Holdings and Rakuten Securities. Reports confirm that the FSA is preparing to present its proposal to the Financial Services Council. It will also consult the Prime Minister’s advisory body for feedback.

Japan is reassessing its crypto regulation strategy as global financial institutions adopt digital assets. “Banks need equal ground with fintechs,” a source told local media. A clear legal framework could open the path for institutional involvement.

Japan Rethinks Ban on Crypto Holdings

The FSA is considering removing a 2020 ban on direct crypto investment by banks. If approved, this would mark a major regulatory overhaul in Japan’s crypto regulation landscape. The rule aimed initially to limit exposure to volatile markets.

Now, the agency may permit banks to hold crypto just like they hold stocks or bonds. However, it will impose strict disclosure and risk management requirements. The FSA emphasized the need to warn retail clients about the volatility of crypto.

Bitcoin and other digital assets remain unbacked, the regulator noted. “Excessive holdings may pressure bank balance sheets,” the FSA warned. The agency aims to strike a balance between innovation and financial stability.

Bitcoin Reacts Amid Market Turbulence

Amid Japan’s crypto regulation discussions, the broader market faces selling pressure. The global market cap dropped 2%, falling to $3.70 trillion. Meanwhile, 24-hour trading volume surged 31% to $224 billion.

Bitcoin saw a brief spike above $113,000 before retreating to under $109,000. It currently trades at an average price of $108,773. This movement followed sharp drops in gold and silver prices.

Gold plunged 5% to $4,130, and silver fell nearly 8%. Traders have redirected funds into crypto markets. Bitcoin futures open interest jumped from $28 billion to $32 billion since the Oct. 10 crash.

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