Japan is one of the first major economies to build a comprehensive framework for crypto. Since 2016–2017, the Financial Services Agency (FSA) has regulated “crypto-assets” and the businesses that handle them under the Payment Services Act (PSA) and, for certain instruments, the Financial Instruments and Exchange Act (FIEA). Exchanges must register, meet capital and cybersecurity standards, segregate customer assets, and follow strict AML/KYC rules.
Who regulates what
FSA is the lead regulator for exchanges and payment-like use of crypto under the PSA; when tokens function like securities/derivatives, FIEA applies. Japan formally recognizes a self-regulatory organization, the Japan Virtual and Crypto-Assets Exchange Association (JVCEA), to set and enforce detailed industry rules in coordination with the FSA.
Stablecoins in Japan
Japan created a clear “digital money-type stablecoin” category. Only licensed banks, trust banks, and fund transfer service providers may issue such stablecoins, with requirements for redemption at par, custody, and disclosures. This framework—updated in 2023—aims to protect users while enabling innovation.
AML/CFT and the Travel Rule
Japan implements the FATF “Travel Rule.” Since 2023, VASPs must transmit originator/beneficiary information for transfers; guidance indicates a US$3,000 threshold and equivalency lists to manage the “sunrise” problem when counterparties are in less-compliant jurisdictions.
Tax treatment and recent reforms
For individuals, crypto is generally taxed as miscellaneous income; policy debates continue about rates. In late 2023, the government approved reforms to exempt corporations from tax on unrealized gains on certain crypto holdings starting in FY2024—addressing a major barrier for Web3 startups. Further proposals under discussion would streamline taxation and potentially move toward a 20% rate for some investors.
Market structure and investor protection
Japan tightened oversight following major exchange hacks, requiring robust custody (cold-wallet ratios), internal controls, and asset segregation. The result is a mature licensing regime for Crypto Asset Exchange Services (CAESPs) that balances consumer protection with market development.
What’s next
In March 2025, reports indicated the FSA plans to revise the FIEA to grant crypto-assets the status of “financial products,” bringing insider-trading-style restrictions explicitly into scope; a bill could be submitted as early as 2026. This would further align crypto market conduct with securities-market norms.
Bottom line: Japan treats crypto as a regulated financial sector, not a gray area. Clear licensing, a defined stablecoin regime, strong AML enforcement, and evolving tax and market-conduct rules make Japan one of the most structured jurisdictions for digital assets—and a bellwether for responsible Web3 growth.
