Japan’s cryptocurrency market is experiencing continued expansion, driven by the increasing popularity of both cryptocurrency and stablecoin markets. According to the Japan Virtual and Crypto Asset Exchange Association, by April 30, 2025, there were 32 registered crypto asset exchange providers in the country. As of February 2025, the spot trading volume reached approximately ¥1.9 trillion (roughly $13.1 billion), with margin trading at ¥1.5 trillion.
The total number of accounts held by these exchanges surpassed 12 million, with customer deposits exceeding ¥5 trillion by the end of January 2025. A survey by the Japanese Financial Services Agency (FSA) revealed that 7.3% of individual investors in Japan, who have investment experience, hold cryptocurrency, a figure higher than those with investments in foreign exchange or corporate bonds.
Stablecoins and Tokenized Assets
In the stablecoin sector, SBI VC Trade launched the USDC stablecoin (tied to the U.S. dollar) in April 2025. Several money transfer service providers are exploring the issuance of yen-pegged stablecoins using their existing money transfer service licenses. The tokenization of bank deposits through systems such as DCJPY (Digital Currency JPY) is also gaining attention, with GMO Aozora Net Bank already issuing its own, and projects involving large banks and online banks in progress.
Despite this market growth, significant challenges remain. A large domestic cryptocurrency exchange provider suffered a massive hack that resulted in the loss of Bitcoin worth approximately $305 million, underscoring the ongoing need for robust customer asset protection measures.
Concerns have also been raised about improper investment management and advisory practices related to crypto assets, as well as illegal solicitation activities by unregistered operators. There is a growing recognition of the need to strengthen user protection mechanisms and increase deterrence against unregistered companies.
Amendments to the Payment Services Act (PSA)
The Payment Services Act (PSA) has undergone significant amendments concerning cryptocurrency and stablecoins. Key changes include:
Relaxation of Reserve Requirements for Trust-Based Stablecoins: The amendments ease the reserve requirements for stablecoin issuers classified as “electronic payment tools.” Previously, issuers were required to hold the full value of the issued stablecoins in demand deposits or similar high-liquid instruments. Under the new rules, issuers are allowed to manage up to 50% of the value in low-risk assets such as Japanese or U.S. government bonds with a remaining term of three months or less, or time deposits with early termination options. This change is expected to improve the efficiency and global competitiveness of stablecoin issuers.
Introduction of a New “Intermediary” Category: A new category has been introduced for intermediary entities that facilitate cryptocurrency or electronic payment tool transactions between users and registered service providers. These intermediaries, who do not hold customer assets, are exempt from capital adequacy requirements. Anti-money laundering (AML) and counter-terrorism financing (CFT) obligations are passed on to the main affiliated company.
Domestic Asset Custody Orders: To prevent the outflow of customer assets in the event of the bankruptcy of crypto asset exchange operators or electronic payment tool providers dealing only in spot trading (not derivatives), a new legal mechanism allows regulators to issue orders mandating that assets be held within Japan. This measure builds on practices implemented during the 2022 bankruptcy of FTX Japan, which were proven effective in protecting customer interests.
Updates on Cryptocurrency Legislation
As of April 2025, Japan is actively developing its legal and tax frameworks for cryptocurrency. The ruling Liberal Democratic Party’s Web3 Project Team (Web3PT) has proposed that cryptocurrency be categorized as a separate asset class under the Financial Instruments and Exchange Act (FIEA).
A key component of this proposal is transitioning from the current tax treatment of cryptocurrency earnings (which are classified as miscellaneous income and subject to a progressive tax rate of up to 55%) to a unified 20% financial income tax system. The proposal also includes provisions for self-assessment taxation of crypto asset trading profits and the ability to carry forward losses to offset future earnings for up to three years.
The UK Financial Services Authority’s April 2025 discussion paper, titled “Review of Crypto Asset Systems,” aims to balance market innovation with user protection. The paper focuses on classifying crypto assets based on their function and establishing a regulatory framework that aligns with the Foreign Investment Law (FIEA) for securities-like tokens.
For cryptocurrency exchanges, the current view suggests that a licensing system similar to traditional financial exchanges or self-trading systems for financial instruments is not necessary. However, it is acknowledged that proper trading management and system development will be key areas for further research, given the collective nature of the exchanges and the numerous parties involved.
The momentum for the introduction of crypto asset exchange-traded funds (ETFs) is also growing. Reports from KPMG and QUICK have suggested creating domestic cryptocurrency benchmarks in yen and developing the legal and regulatory framework needed for ETFs. Future legislative amendments are expected to pave the way for the “financial productization” of cryptocurrency assets.
Real Estate ST and LPS Bills
Significant legal changes have also impacted tokenized assets and investment structures.
Real Estate Security Token (ST) under FIEA: With amendments to the Financial Instruments and Exchange Act (FIEA) effective from November 1, 2024, real estate security tokens (STs) are now categorized as “rights represented by electronically recorded transferable securities” under FIEA, making them subject to the law. Real estate operators handling these tokenized instruments now need to comply with both the Real Estate Specific Joint Enterprise Act and FIEA.
Amendment to the Limited Partnership Investment Law (LPS): The amendment to the LPS allows limited partnership enterprises (LPS) to acquire and hold cryptocurrency assets. Previously, LPS’s permitted business activities were narrowly defined, but the amendment now includes crypto assets. This change benefits venture capital firms investing in Web3 startups and other emerging companies using crypto assets in their business models. However, not all types of crypto assets are qualified investment targets under this amendment.
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