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Japan's New Business Rules for Crypto Exchanges: Registration, Safeguards and System Providers

Cover Image for Japan's New Business Rules for Crypto Exchanges: Registration, Safeguards and System Providers
Masayuki Tani

The Short Answer

The 2026 amendment to the Financial Instruments and Exchange Act (金融商品取引法, Kin'yū Shōhin Torihiki-hō, or "FIEA") turns crypto exchanges into registered financial instruments businesses. The FSA describes their new regime as equivalent to the one for Type I financial instruments business, the category that covers securities firms. The rules take effect on a date to be set by Cabinet Order, no later than 22 July 2027.

  • Registration will also cover borrowing crypto assets from users, and investment advice and fund management involving crypto assets.
  • Registration requires, among other things, a company with a board, an office in Japan and a capital adequacy ratio of at least 120%.
  • Exchanges will have to handle only tokens that meet standards set by Ordinance, and set aside a liability reserve.
  • Providers of key systems for holding customers' crypto assets will have to notify the FSA in advance, and exchanges will be able to use only providers that have done so.

Where Things Stand

The amendment act (Act No. 64 of 2026) was enacted on 15 July 2026 and promulgated on 23 July 2026. It moves the regulation of crypto-asset trading from the Payment Services Act (資金決済法, Shikin Kessai-hō) into the FIEA. Our overview of the amendment describes the main changes.

The business rules take effect with the other crypto provisions, on a date to be set by Cabinet Order within one year of promulgation. Much of the detail, including the token standards, the reserve rate and the scope of the key system rules, is left to Cabinet Office Ordinances. In its strategic priorities for July 2026 to June 2027, the FSA says it will prepare supervisory guidelines and other materials for the amended FIEA to take effect, and strengthen the functions of the self-regulatory organization.

Why the Rules Are Being Tightened

The Financial System Council's Working Group on Crypto-asset Systems, whose report the FSA has published in English, started from the point that crypto assets are about as tradable as security tokens. It recommended that crypto trading businesses be regulated, in principle, like Type I financial instruments businesses. It also recommended keeping the Payment Services Act's crypto-specific safeguards, which have no counterpart in the FIEA's rules for Type I firms.

The FSA's explanatory materials for the bill point to a continuing run of crypto assets lost to cyberattacks.

Who Needs to Register

Crypto-asset trading business

The act calls the regulated business "crypto-asset trading business" (暗号資産取引業, angō shisan torihikigyō). It consists of the following activities carried on as a business (Article 28(5), referring to Article 2(8)(xviii) to (xxv)):

  • buying and selling crypto assets, including exchanging one for another,
  • intermediating, brokering or acting as agent in those trades,
  • underwriting, offering and handling offerings of specified crypto assets (tokens that only a specific person has the authority to issue, and similar tokens designated by Ordinance),
  • taking customers' money in connection with those activities,
  • holding crypto assets for others, and
  • borrowing crypto assets.

No one may carry on the business without registration (Article 29). Existing Type I firms that want to deal in crypto assets need a change of registration.

Borrowing crypto assets

Borrowing crypto assets is new. Some operators borrow crypto assets from users, stake or lend them on, and return them later with a fee. The working group noted that, under the Payment Services Act, such borrowing does not require registration unless it amounts to holding crypto assets for others. Its report recommended bringing these models under the FIEA, because the users take on risk in pursuit of a return.

The act gives lighter treatment to a firm whose only crypto activities are borrowing crypto assets, or an issuer's offering of its own specified crypto assets. Such a firm registers as a "crypto-asset trading special business operator" (暗号資産取引特例業者). Unless it also carries on Type I business, it is not subject to the liability reserve or the capital adequacy ratio. Unless it also carries on Type I business or investment management, it does not have to notify the FSA before taking on other businesses (Article 29-6(3) and (4)).

Advice, fund management and intermediaries

Giving investment advice on the value of crypto assets, and managing money invested in crypto assets, are added to the FIEA's investment advisory business and investment management business (Articles 2(8)(xi), (xii), (xiv) and (xv), and 28(3) and (4)). These activities are regulated under those existing categories, not as crypto-asset trading business.

Intermediaries registered under the Payment Services Act's crypto-asset services intermediary regime move into the FIEA's financial instruments intermediary regime. Those registered on the effective date can continue for six months without FIEA registration, or, if they are already financial instruments intermediaries, without a change of registration. If they apply within that period, they can continue until the application is decided, but for no more than two years from the effective date. They must notify the FSA within two weeks of the effective date (Supplementary Provisions, Articles 18 to 20). An intermediary's registration application must name the exchange that entrusts it with the business and the tokens it will handle (Article 66-2(1)).

What Registration Requires

The FIEA's grounds for refusing registration apply to crypto-asset trading business much as they apply to Type I business (Article 29-4(1)). An applicant must, among other things:

  • be a stock company with a board of directors and statutory auditors or an equivalent committee, or a foreign company of the same type,
  • if it is a foreign company, already carry on the same kind of business in its home country, or be a similar person designated by Cabinet Order,
  • have an office in Japan, and, if it is a foreign company, a representative in Japan,
  • meet minimum capital and net asset amounts to be set by Cabinet Order,
  • have a capital adequacy ratio of at least 120%,
  • join the self-regulatory association for the business, or adopt and enforce internal rules equivalent to the association's rules, and
  • if it will hold customers' crypto assets or money, meet a financial base standard to be set by Ordinance.

A person who acquires 20% or more of the voting rights in a domestic crypto trading business, or 15% in some cases, becomes a "major shareholder". A major shareholder must file a notification with the FSA without delay (Articles 29-4(2) and 32(1)), and an applicant can be refused registration if a major shareholder falls within the grounds for disqualification (Article 29-4(1)(v)).

Ongoing Duties

Other businesses

A crypto trading business may carry on listed activities incidental to its business, such as lending crypto assets and providing crypto-related information (Article 35-2-2(1)). A firm that does not also carry on Type I business or investment management may take on other businesses after notifying the FSA in advance (Article 35-2-2(3) and (4)).

Business management systems

Every financial instruments business must set up business management systems, as Ordinance requires (Article 35-3(1)). The FSA expects the Ordinance for crypto trading businesses to cover the review of the tokens it handles, checks on customer suitability and trade surveillance. The working group's report also listed providing information on those tokens, and stopping handling a token whose issuer breaches the disclosure rules.

Which tokens can be handled

A crypto trading business must not trade, broker, underwrite, offer or hold any token that does not meet the standards set by Ordinance for the public interest and investor protection (Article 43-7). The FSA plans standards on liquidity, compliance and the management of transfer records.

If the issuer of a specified crypto asset breaches the FIEA, the FSA can, where necessary and appropriate for the public interest or investor protection, order an exchange to suspend trading in that token or to stop handling it, after a hearing (Article 43-8). A firm that trades crypto assets on a multilateral platform must publish, for each token, the daily trading volume and the high, low and closing prices (Article 43-9).

Holding customers' assets

A firm that holds customers' money or crypto assets owes its customers a duty of care in doing so (Article 43-10). It must use the methods set by Ordinance for managing customers' crypto assets properly (Article 43-11). The FSA's materials say that the current safeguards, including the principle of holding customers' crypto assets in cold wallets, are carried over to the FIEA.

Where a firm uses information systems provided by others for its trading platform, or outsources part of its business, it must take the measures set by Ordinance to supervise the provider or contractor (Article 43-13).

Liability reserve and capital

Under the Payment Services Act, exchanges hold crypto assets of the same kind and amount as the customer assets they keep in hot wallets, as a source of compensation if those assets are stolen. The working group pointed out that assets in cold wallets can also be stolen.

The amendment requires a crypto trading business to set aside a "financial instruments transaction liability reserve" (金融商品取引責任準備金) in line with its trading volume, as Ordinance provides (Article 46-5). The reserve may be used only to cover losses from accidents in trading or in other cases set by Ordinance. The FSA's materials describe it as a source of compensation for customers when crypto assets are stolen, and say the Ordinance is planned to set the rate according to the balance of crypto assets held, taking account of the level of security.

A crypto trading business must also keep a capital adequacy ratio of at least 120%, file it with the FSA monthly and publish it quarterly (Article 46-6). The ratio compares the firm's capital, less fixed assets and similar items, with the amount of risk it faces from changes in the prices of the securities or crypto assets it holds and from other causes. What goes into each side of the ratio will be set by Ordinance.

Sales representatives

Employees who solicit crypto trades for a financial instruments business must be registered as sales representatives (外務員, gaimuin) (Article 64(1)(iii)).

Providers of Key Custody Systems

The working group noted that recent thefts had involved cyberattacks on companies that supply wallet software to exchanges. Those companies do not hold customers' crypto assets and did not need registration.

The act creates a new category, "crypto-asset custody-related business" (暗号資産管理関係業務, angō shisan kanri kankei gyōmu). It covers the following services for a firm that holds crypto assets for others, each within a scope to be set by Ordinance (Article 2(54)):

  • letting the firm use, on a continuing basis, information systems needed to hold customers' crypto assets,
  • maintaining or managing those systems on the firm's behalf, and
  • carrying out other parts of the custody business on the firm's behalf.

A person who wants to provide these services must notify the FSA in advance of its name, its financial base, its offices and other details (Article 66-94(1)). Certain persons may not provide them, including a person with no office in Japan and a foreign company with no representative or agent in Japan (Article 66-94(5)). A provider must set up business management systems and take measures to keep information secure (Article 66-97). The FSA can order a provider to improve its business, to the extent needed, where the FSA finds this necessary and appropriate for the public interest or investor protection. The FSA can also order a provider to suspend or stop the business on grounds such as a breach of law (Articles 66-102 and 66-103).

On the exchange side, a firm that holds crypto assets for others may obtain these services only from a provider that has filed the notification (Article 43-12(1)). It must also set standards and procedures for choosing the provider, and supervise it (Article 43-12(2)).

Foreign Exchanges

A foreign crypto business that is not registered in Japan may not carry on crypto trading activities with persons in Japan. The exceptions are dealings with a registered crypto trading business and other cases set by Cabinet Order (Article 62-2).

The working group's report noted that foreign securities firms may, without soliciting, accept orders from investors in Japan, and suggested that a similar framework may be appropriate for crypto trading.

When the Rules Apply

An exchange registered under the Payment Services Act on the effective date can continue its exchange business for six months without FIEA registration, or, if it is already a financial instruments business, without a change of registration. If it applies within that period, it can continue until the application is decided, but for no more than two years from the effective date. During that period the rule on using only notified system providers does not yet apply. For an exchange that is not already a financial instruments business, the liability reserve and the capital adequacy ratio do not yet apply either (Supplementary Provisions, Articles 8 and 9). Each such exchange must notify the FSA, within two weeks of the effective date, of matters including the tokens it handles (Supplementary Provisions, Article 10).

Businesses whose activities are newly brought within the FIEA, such as borrowing crypto assets or crypto investment advice, can continue them for a similar period, but only with existing customers and only in the tokens they already handle (Supplementary Provisions, Articles 5 and 6). They must notify the FSA within two weeks of the effective date (Supplementary Provisions, Article 7).

A provider of key custody systems does not need to notify the FSA for services it supplies to an exchange that was already a financial instruments business and is carrying on crypto business under the transition (Supplementary Provisions, Article 21).

What to Watch

The points to watch in the subordinate rules are:

  • the Cabinet Order setting the minimum capital and net assets,
  • the Ordinance on the standards for tokens a firm may handle,
  • the Ordinance on the reserve rate,
  • the Ordinance on which systems and services count as crypto-asset custody-related business,
  • the Cabinet Order on the cases in which foreign businesses may deal with persons in Japan, and
  • the FSA's supervisory guidelines.

This article is general information, not legal advice. If you run, or plan to run, a crypto business in Japan, or supply systems to one, we recommend that you obtain legal advice on your own circumstances. If you would like to discuss your situation with us, please get in touch.

References

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