Japan’s Banking Sector Poised for Major Crypto Shift: From Asset Holding to Exchange Operations

Main Points :

• Japan’s Financial Services Agency (FSA) is considering allowing banks to acquire and hold crypto assets (such as Bitcoin) for investment purposes.
• The reform would enable banks to trade crypto akin to equities and bonds, subject to new risk-management and capital requirement frameworks.
• Banks may also be permitted to register as crypto-asset exchange operators, thus offering custody, trading and exchange services.
• This policy shift is driven by the rapid growth of the crypto market in Japan (over 12 million crypto accounts by February 2025) and the increasing tokenisation of financial assets.
• Parallel to these regulatory moves, major Japanese banks are already deepening blockchain/digital-asset initiatives, such as issuing a yen-pegged stablecoin and exploring digital yen issuance.
• For crypto investors and blockchain practitioners, this signals new institutional demand, expanded service infrastructure, and a potentially more integrated tradfi–crypto environment in Japan.

1. Regulatory Pivot: Banks Holding Crypto

Japan’s FSA has revealed it is seriously reviewing its regulatory framework to permit commercial banks to acquire and hold crypto-assets such as Bitcoin for investment. Historically, since the 2020 revision of the supervisory guidelines, Japanese banks effectively faced a prohibition on holding unbacked crypto assets, due to concerns about extreme price volatility and related risks to bank solvency.

Under the proposed reform, banks would treat crypto assets more similarly to equities or government bonds: they could buy, hold, and sell them within regulated exposure limits. But crucially, the FSA emphasises that these permissions will come with robust risk-management standards, capital adequacy requirements, exposure limits, and other safeguards to ensure the banking sector remains financially sound.

For those seeking new crypto-asset investment opportunities or infrastructure plays, this regulatory shift matters. If banks begin holding crypto assets, it could drive institutional demand upward, increase liquidity, and perhaps facilitate new forms of hybrid products (e.g., bank-issued token portfolios).

2. Banks as Crypto Exchanges and Custodians

In tandem with enabling asset-holdings, the FSA is considering allowing bank groups to register as licensed crypto-asset exchange operators. That means a major Japanese banking group could offer trading, custody and exchange services directly under its banking licence umbrella.

This would have several practical implications: first, retail and institutional clients might gain access to crypto services through familiar bank channels (increasing trust and onboarding). Second, banks’ operational infrastructure (AML/KYC, cybersecurity, regulatory compliance) could provide higher-integrity services relative to small unregulated exchanges. Third, the entry of banks into the crypto exchange ecosystem could raise competitive standards and foster better interoperability and institutional-grade custody.

For a blockchain practitioner or a project seeking adoption, this means that services (custody, banking relationships, fiat-on/off ramps) could become more reliable and bank-integrated—potentially lowering counterparty risk and encouraging larger-scale projects connecting digital assets and traditional finance.

3. Market Growth & Tokenisation Pressure

One of the triggers for this regulatory change is the marked growth of crypto adoption in Japan: as of February 2025, around 12 million crypto trading accounts had been opened—about 3.5 times the number five years prior.

At the same time, the tokenisation of financial assets (such as securities, real-world assets, stablecoins) is gaining traction. The FSA and industry recognise that in order to remain competitive globally, Japan must create an integrated framework allowing traditional financial institutions (banks) to participate meaningfully in digital-asset markets. This convergence of tradfi and crypto is increasingly shaping design of infrastructure and regulation.

For those hunting new crypto opportunities, this means: more infrastructure demand (tokenisation platforms, custody providers, bank-accessible rails), potential new compliance standards (which may raise entry-barriers but also reduce risk), and possibly new investment vehicles centred on banks or bank-tokenised assets.

4. Digital Asset Initiatives by Japanese Banks

While regulation is evolving, major Japanese banks are not waiting for full implementation—they are already launching or planning digital-asset initiatives, signalling that the ecosystem is about to accelerate. For example, three of Japan’s largest banking groups—Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Financial Group (SMFG) and Mizuho Financial Group—announced plans to jointly issue a yen-pegged stablecoin, with a later prospect of a U.S.-dollar version.

Separately, the Japan Post Bank plans to launch a digital-yen token (DCJPY) by the end of fiscal 2026, fully backed 1:1 by fiat yen, enabling instant blockchain-based transactions of digital securities and other asset-tokenised instruments.

These developments reinforce that the banking sector sees blockchain and tokenisation as strategic, not experimental. For blockchain practitioners, this means more demand not only for “crypto coins” but also for enterprise-grade infrastructure (token issuances, stablecoins, settlement systems) and collaborations between fintechs and banks.

5. Implications for Investors and Blockchain Practitioners

For those looking for new crypto assets or revenue sources, and for those working on practical blockchain applications, this Japanese regulatory and institutional shift offers multiple angles:

• Institutional demand uptick: If banks are allowed to hold crypto assets, that could create sustained institutional bidding, support liquidity and reduce volatility over time (or at least change its character).
• New hedge and product opportunities: Bank-driven crypto exposure may spawn new financial products (e.g., bank-tokenised funds, custody services, structured crypto debt).
• Improved infrastructure and lower risk: Bank participation in exchange/custody lowers entry-barriers for institutional and retail players, and may catalyse professional service providers.
• Tokenisation boom: As banks roll out stablecoins and digital-fiat tokens, there’s heightened opportunity for blockchain projects tied to settlement, token-issuance software, compliance tooling, cross-border rails.
• Regulatory framework clarity: A more stable regulatory environment gives confidence to projects and investors—especially in a jurisdiction like Japan which is globally influential.
• Geographic diversification: For global crypto strategies, Japan may emerge as a major market for bank-integrated digital-asset business.

However, it is prudent to remember that this remains under discussion. The FSA has emphasised risk-management and solvency concerns. Banks will likely face strict exposure limits, capital requirements, and governance frameworks before full participation is allowed. Investors and developers should monitor the rule-making process carefully.

6. Recent Trends & Next Milestones

Beyond the primary reform, several other related trends are worth noting:

• As of October 2025, Japan approved a deal in which the payments app operator PayPay Corp. (backed by SoftBank Corp.) purchased a 40 % stake in the Japanese subsidiary of global exchange Binance—illustrating that fintech-crypto convergence is advancing.
• Japan is transitioning crypto regulation under the Financial Instruments and Exchange Act (FIEA), meaning crypto assets may be treated similar to securities (e.g., subject to insider-trading rules).
• Tokenisation and stablecoin issuance are gaining as global banks and fintechs push for digital settlement use-cases (not just speculation). Japan’s banks launching a yen-stablecoin is part of that pattern.
• The number of crypto accounts (12 million+) suggests a growing domestic investor base—so infrastructure and services built around retail onboarding may still have growth runway.

Next Milestones to watch:

• Formal rule-change or guidelines from the FSA allowing banks to hold crypto (date still TBD)
• Exposure-limit and capital-requirement details for bank crypto holdings
• Bank registration as crypto-asset exchange operators (and which banks apply first)
• Outcome of the yen-stablecoin project by the megabanks
• Legislative move to treat crypto assets under FIEA and apply insider-trading regulation

Summary & Conclusion

In summary, Japan is on the verge of a fundamental shift in how digital assets are integrated into its traditional banking system. The FSA’s consideration of enabling banks to hold and trade crypto assets—and even become licensed exchanges—is a signal of growing institutionalisation of the crypto ecosystem in Japan. For blockchain practitioners and investors hunting new sources of return, this development offers multiple opportunity vectors: institutional demand growth, infrastructure build-out, tokenisation plays, and bank-based service models.

At the same time, this shift underscores the importance of risk management, regulatory compliance and operational infrastructure. The reform is not a free for all—it will come with governance, capital and prudential layers. If you’re looking for the next wave of growth in crypto, Japan’s intersection of banking + digital assets is one to watch closely. For developers, consider how your project aligns with bank-friendly tokenisation or custody models. For investors, monitor which banks move first, what products emerge, and how the regulatory timeline plays out.

With the institutional and regulatory framework possibly tilting in favour of crypto-assets in Japan, the window of opportunity is opening. Being early (but with due diligence) may position you to ride the next leg of crypto adoption in a major market.