Japan Enforces Crypto Custody Registration to Boost Security
Japan’s Financial Services Agency (FSA) has proposed new crypto custody regulation requiring all companies providing trading or custodial services to register or notify authorities before operating. This crypto custody regulation aims to close legal gaps that previously allowed vendors to operate without formal oversight. Exchanges will be limited to partnering with registered custodians, ensuring standardized security practices, incident reporting, and clear accountability. The move follows the 2024 DMM Bitcoin hack, in which 48 billion yen was lost due to a vulnerability at third‐party custodian Ginco. The FSA plans to submit amendments to the Financial Instruments and Exchange Act during the 2026 Diet session, allowing industry consultation on compliance costs that may burden smaller firms. Regulators argue the measures will enhance customer protection, market integrity, and long‐term confidence. In parallel, Japan is advancing regulated stablecoin development, having approved JPYC, the first yen‐pegged token, and backing pilot projects from MUFG, SMBC and Mizuho.
Bullish
Mandating registration for crypto custodians should bolster market security and trader confidence, key drivers of bullish sentiment. In the short term, compliance costs and reduced service options may constrain smaller firms, but the clear oversight framework and enhanced incident reporting are likely to attract institutional investors. Over the long term, standardized security practices and stablecoin initiatives like JPYC strengthen market infrastructure, underpinning a positive outlook for the crypto sector.