Japan Advances Toward Crypto Integration as FSA Considers Allowing Banks to Hold Bitcoin

Japan’s financial sector is undergoing a major digital transformation as the Financial Services Agency (FSA) explores regulatory reforms to let domestic banks invest in non-backed crypto assets such as Bitcoin. This shift marks a significant departure from Japan’s traditionally cautious approach to digital assets, reflecting growing confidence in the maturing crypto market.

Under the current 2020 supervisory guidelines, banks are restricted from investing in cryptocurrencies due to volatility concerns. However, with over 12 million crypto accounts now open in Japan—a 3.5-fold increase over five years—the FSA is reassessing this stance. Allowing banks to include Bitcoin and other digital assets in their portfolios would recognize crypto as a legitimate asset class, potentially improving portfolio diversification and profitability.

Still, the FSA’s strategy remains balanced between innovation and risk management. Discussions at the Financial System Council focus on establishing exposure limits to control the volume of crypto holdings relative to bank capital. These measures aim to ensure financial stability while enabling controlled entry into the digital asset market.

At the same time, Japan’s three largest banks—Mitsubishi UFJ (MUFG), Sumitomo Mitsui (SMFG), and Mizuho—are collaborating on a yen-pegged stablecoin project through fintech partner Progmat Inc. Leveraging the revised 2023 Payment Services Act, this initiative seeks to create interoperable, blockchain-based stablecoins for corporate settlements, initially targeting use by Mitsubishi Corp. The project could streamline payments and cross-border transactions, enhancing efficiency for Japanese corporations.

Furthermore, the FSA is considering allowing bank groups to register as Crypto Asset Exchange Service Providers, strengthening the role of traditional financial institutions in Japan’s digital economy. Together, these reforms signal Japan’s intention to position itself as a global leader in integrating crypto assets within mainstream finance.