Japan Accelerates Stablecoin and Crypto Regulatory Clarity
Japan has steadily developed a comprehensive regulatory framework for cryptocurrencies. This article reviews Japan’s cryptocurrency regulatory development and the recent updates.
Overview of Japan’s Cryptocurrency Regulations
In 2017, Japan amended the Payment Services Act to recognize cryptocurrencies as a legal means of payment and mandated that cryptocurrency exchanges register and adhere to anti-money laundering (AML) and know-your-customer (KYC) requirements. Cryptocurrencies can be used for goods and services transactions in Japan, provided companies meet these legal standards.
In 2023, further amendments to the Payment Services Act and the Financial Instruments and Exchange Act clarified regulatory requirements for stablecoins, mandating that issuers be regulated entities to ensure redemption rights for holders. These steps laid the groundwork for significant regulatory advancements in 2025.
In early 2025, Japan’s Financial Services Agency (JFSA) introduced updates to the Payment Services Act, accelerating and refining the framework for stablecoin issuance and usage.
Regulatory Changes in Early 2025
In February 2025, the JFSA approved a report from the ‘Working Group on the Payment System, etc.’ under the Financial System Council. Compiled after seven discussions since August 2024, the report proposed adjustments to regulations for cryptocurrencies and stablecoins, aiming to balance robust consumer protection with greater asset management flexibility for issuers.
Previously, issuers of stablecoins classified as electronic payment instruments had to hold reserve assets equal to their issuance volume entirely in demand deposits to guarantee redemption at any time. The new proposal eases this requirement, permitting up to 50% of reserves to be invested in low-risk instruments — such as short-term Japanese or U.S. government bonds or fixed-term deposits — provided the principal remains intact, with the remainder kept in demand deposits.
The recommendations also established a new ‘crypto intermediary services’ category for entities facilitating cryptocurrency transactions without holding customer funds. Previously, these intermediaries were subject to the same registration requirements as crypto exchanges, posing significant entry barriers. Under this proposal, they are exempt from stringent financial and transaction verification obligations, with primary responsibility for user protection and anti-money laundering/countering the financing of terrorism (AML/CFT) shifted to exchanges and issuers managing customer assets.
In March, the ‘Amendment to the Payment Services Act’ was submitted to the Diet. This amendment updates regulations for cryptocurrencies, electronic payment methods (including stablecoins), and remittance services. Additionally, the JFSA reportedly issued a license under the ‘Electronic Payment Instrument Transaction Business’ category for handling fiat-pegged stablecoins, with SBI VC Trade, a subsidiary of SBI Holdings, recognized as an early registrant.
Broader Crypto Regulatory Reform by the JFSA
According to a panel discussion in the ‘HashPort・WebX Round Table’ Web3 event, a senior JFSA official mentioned that an expert committee on cryptocurrency regulation would finalize its conclusions by June 2025. These findings will be reviewed by the Financial System Council, with legislative proposals drafted for submission in 2026. These regulatory efforts draw on global regulatory trends and acknowledge cryptocurrencies’ growing acceptance as investment assets. While the Payment Services Act currently mandates strict asset segregation and disclosure obligations for crypto exchanges, future rules are expected to further strengthen investor protection.
Aligning Crypto Assets with Securities Regulations
Additionally, a recent Nikkei report indicates the JFSA is considering designating cryptocurrencies as financial products akin to securities. This would impose stricter disclosure requirements on service providers, enhancing investor protection. The JFSA is currently assessing existing regulations through private expert sessions, with findings to shape this shift by June 2025. Such a classification could also enable future approval of cryptocurrency-based Exchange-Traded Funds (ETFs), boosting the crypto market’s prominence and adoption in Japan.
In parallel, Japan’s cryptocurrency industry is also anticipating a potential shift in the tax system. Currently, cryptocurrency gains are subject to comprehensive taxation with rates up to 55%. Discussions within the industry suggest a possible move to a separate taxation system with a flat 20% rate, contingent on establishing a robust investor protection framework. If implemented, this reform could greatly boost Japan’s appeal as a crypto investment hub.
A Promising Future for Japan’s Crypto Market
These recent policy developments clearly illustrate Japan’s proactive and strategic approach toward comprehensive crypto regulation. From stablecoin licensing to potential tax reforms and securities-level disclosures, Japan continues to build an increasingly robust regulatory environment.
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GMO Trust connects traditional finance and blockchain technology for everyone. We issue GYEN, the world’s first regulated Japanese Yen stablecoin, and ZUSD, our trusted U.S. Dollar stablecoin. Visit our website to learn more.
Disclaimer
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