Japan was the first country to establish a regulatory framework for crypto assets (“Crypto Assets”). Perhaps because of this head start, adoption of blockchain technology is now fairly prevalent in the Japanese financial industry. (As of September 30, 2026, there are 27 registered Crypto Asset exchange service providers (“CAESPs”) in Japan).

Since 2020, security tokens, sometimes referred to as digital securities, have been in the spotlight. As a result of recent amendments to the relevant laws and regulations, an increasing number of financial institutions are entering this new market, focusing mainly on digital corporate notes and tokenised equity interests in real estate funds. For instance, a subsidiary of Kenedix, one of the leading real estate companies in Japan, launched the first public offering of asset-backed security tokens in Japan in July 2021, and multiple similar projects thereafter. Most of such asset-backed security tokens are based on a beneficiary certificate issuance trust scheme that utilises a blockchain platform. In addition, digital art and digital trading cards represented by non-fungible tokens (“NFTs”), which are non-replaceable digital tokens issued on a blockchain, have recently been traded for considerable amounts. As a result, NFTs have garnered considerable attention in Japan. NFTs are considered innovative because they involve the creation of unique, one-of-a-kind data based on blockchain technology, unlike other digital data that are inherently free and easy to copy.

Since 2022, stablecoins have been one of the key focus areas in the Japanese Fintech industry. The bill for amending the Payment Services Act (the “PSA”) was passed by the Diet and promulgated in June 2022, with the aim of introducing new regulations on stable coins. This amendment entered into force on June 1, 2023. On March 25, 2025, Circle announced that SBI VC Trade, a cryptocurrency exchange in Japan, would start listing and distributing USDC (i.e., a stablecoin issued by Circle) on March 26, 2025, while other leading exchanges, i.e., Binance Japan, bitbank, and bitFlyer, would do the same in the near future. This was an epoch-making moment for the blockchain ecosystem in Japan, as this made USDC the first stablecoin approved for use in Japan. In addition, in November 2025, a project of Japan’s three megabanks for the joint issuance of a JPY-denominated stablecoin was selected for support under the FinTech PoC Hub of the Financial Services Agency of Japan (the “FSA”). The proof-of-concept test, which included the use of the stablecoin for cross-border payments, was conducted in July 2026, and its results were announced in October 2026.

Most notably, on July 15, 2026, the Diet passed the Act to Partially Amend the Financial Instruments and Exchange Act and the Payment Services Act (Act No. 64 of 2026) (the “Amended Law”), which was promulgated on July 23, 2026. Among other things, the Amended Law transfers the regulation of Crypto Assets from the PSA to the Financial Instruments and Exchange Act (as amended, the “Revised FIEA”), where Crypto Assets will form a regulatory category distinct from securities. This is the most fundamental overhaul since Crypto Asset regulations were introduced in 2017.

These developments demonstrate that the application of blockchain technology to business is moving from the stage of Proof of Concept (“PoC”) to the stage of practical application.

No blockchain-specific regulatory framework currently exists in Japan, nor is such regulatory framework anticipated in the near future. Accordingly, blockchain or related businesses and services will be regulated under existing laws or regulations, depending on the legal characteristic of the token minted on a blockchain or the substance of such services. The principal regulator is the FSA. The Japan Virtual and Crypto asset Exchange Association (“JVCEA”) acts as the self-regulatory organisation for Crypto Asset-related businesses.

For example:

1. if the tokens minted on a blockchain (“Blockchain-minted Tokens”) fall within the definition of “Crypto Asset” under the PSA, then a business operator who purchases, sells or exchanges such tokens, intermediates such activities, or manages such tokens for the benefit of others in the course of its business will be regulated as a CAESP. Once the Revised FIEA comes into force, such a business operator will instead be required to register as a “Crypto Asset Trading Operator” under the Revised FIEA. The scope of regulated activities will also expand to include the underwriting, offering of “Specified Crypto Assets” and the borrowing of Crypto Assets;
2. a person who, as a business, sells, purchases or handles the public offering of Blockchain-minted Tokens that fall within the definition of “securities” under the Financial Instruments and Exchange Act (the “FIEA”) must, in principle, be registered as a Type I Financial Instruments Business Operator;
3. an issuer of Blockchain-minted Tokens that are pegged to fiat currencies (such as the JPY or USD) (i.e., stable coins), or an affiliate of such issuer who guarantees the redemption of such stable coins in fiat currencies, may be required to undergo licensing as a Bank under the Banking Act, a fund remittance business operator (“FRBO”) under the PSA, or as a trust company under the Trust Business Act. A business operator that buys, sells or exchanges such stable coins (i.e., electronic payment instruments (“EPIs”)), intermediates such activities, or manages EPIs for others must register as an Electronic Payment Instruments Exchange Service Provider (“EPIESP”);
4. under the amendment to the PSA that entered into force on June 1, 2026, a person who, upon entrustment by a CAESP or an EPIESP, intermediates the purchase, sale or exchange of Crypto Assets or EPIs on its behalf must register as an Electronic Payment Instruments and Crypto Asset Service Intermediary Business Operator (“ECISBO”). Once the Revised FIEA comes into force, the intermediation of Crypto Asset transactions on behalf of a Crypto Asset Trading Operator will instead be regulated as financial instruments intermediary business under the Revised FIEA, while the ECISBO framework under the PSA will continue to apply to the intermediation of EPIs;
5. a business operator that handles the personal information of its users may be subject to the Act on the Protection of Personal Information (“APPI”); and
6. issuance of NFTs and provision of trading services in respect of NFTs are in principle not subject to financial regulations.

The Japanese government takes a generally positive view of the use of blockchain technology in various kinds of businesses.

For instance, in June 2019, the Japanese government published an “Action Plan of the Growth Strategy”, which discussed the importance of the use of blockchain technology, stating that “AI, IoT, robots, big data, blockchain …are general purpose technology (GPT) that broadly affect all industries, similar to adoption of electric power from the 19th to 20th century and IT inroads through the end of the 20th century.”

In addition, in July 2020, the Japanese government published a “Follow-up for Growth Strategy”, stating that “In a decentralized financial system based on blockchain technology, where there are no regulated intermediaries, the Japanese Government will lead the international discussion by actively contributing to the Blockchain Governance Initiative Network (BGIN) to achieve financial administrative objectives, such as financial system stability, user protection and prevention of money laundering, etc.”.

On June 18, 2021 the Japanese cabinet approved the “Growth Strategy (2021),” which includes facilitation of blockchain technology. The development of an eco-system surrounding NFTs and Security tokens is also specifically mentioned in the “Plans for Implementing Growth Strategy” paper published on the same date.

Furthermore, it was stipulated in a paper entitled “Grand Design and Action Plan for a New Form of Capitalism 2023 Revised Version”, which was approved by the Cabinet in June 2023, that the Japanese government would foster the development of an environment for the promotion of web3, including the use of NFTs and decentralised autonomous organisations (DAOs) based on blockchain technology.

The web3 project team of the Digital Society Promotion Headquarters of the Liberal Democratic Party’s Policy Research Council also published the ‘web3 White Paper 2024’ in April 2024, to address various issues related to the promotion of web3.

More recently, the Working Group on Crypto Asset Systems of the Financial System Council compiled a report on December 10, 2025 (the “WG Report”). Based on the WG Report, the Amended Law was approved by the Cabinet on April 10, 2026, passed by the Diet on July 15, 2026 and promulgated on July 23, 2026. In addition, the Outline of Tax Reform for Fiscal Year 2026, approved by the Cabinet on December 26, 2025, provided for separate taxation at a flat rate of 20% on gains from certain Crypto Asset transactions. These measures show that the government is seeking to position Crypto Assets as investment products within a robust investor protection framework, while continuing to promote web3.

The Bank of Japan (“BOJ”) commenced its PoC phase of a CBDC on April 5, 2021. The aim for phase 1 of the PoC was to develop a test environment for the CBDC system and conduct experiments on the basic functions that are central to the CBDC as a payment instrument, such as functions relating to issuance, distribution, and redemption. Phase 1 of the PoC ended in March 2022.

In “Proof-of-Concept Phase 2”, conducted from April 2022 to March 2023, the BOJ added several peripheral functions to the CBDC, in order to ascertain certain important processing performance and technical capabilities in respect of the CBDC ledger. The BOJ also looked at the possibility of applying new technologies to data models and databases in respect of the CBDC.

Thereafter, since April 2023, the BOJ has been proceeding with a pilot program with the aim of evaluating certain technical aspects of CBDC that were not explored in the abovementioned PoCs, leveraging the expertise and insights of the private sector. The pilot program revolves around two pillars: “development of a system for the pilot program and experimentation” and the “CBDC Forum”. Under the former, performance tests are being conducted on the system developed by the BOJ, including desktop experimentation of various types on functions that have not been implemented in the system. Under the latter, the BOJ, in its capacity as secretariat, holds practical discussions on a wide range of themes in respect of retail payments with the private sector.

On April 17, 2024, the Liaison Conference of Relevant Ministries and Agencies and the BOJ on CBDC released an interim report discussing the main design features a CBDC should have. The Liaison Conference subsequently released a second interim report on May 22, 2025 and a progress report on June 19, 2026. The BOJ, for its part, published reports on the progress of the pilot program on April 22, 2024, May 23, 2025 and June 10, 2026.

The government of Japan has so far not decided whether to issue any CBDC in Japan, but discussions continue to be held in this regard.

Under the current framework, Crypto Assets are regulated under the PSA, and a person conducting Crypto Asset Exchange Services (“CAES”) as a business must register with the FSA as a CAESP. Under the Amended Law, Crypto Asset regulation will be transferred to the Revised FIEA. The Revised FIEA will come into force on a date specified by Cabinet Order within one year from the promulgation of the Amended Law on July 23, 2026. The Revised FIEA largely keeps the current definition of Crypto Assets. However, it defines Crypto Assets that only a specific person has the authority to issue (and similar Crypto Assets specified by Cabinet Office Ordinance) as “Specified Crypto Assets”, and subjects their issuers to securities-like disclosure obligations. This reflects the view expressed in the WG Report that there is information asymmetry between users and the centralised administrator of such Crypto Assets. The Revised FIEA also brings Crypto Asset borrowing (e.g., lending programmes) within the regulated “Crypto Asset Trading Business”. Providers of wallet systems and similar services to Crypto Asset Trading Operators will become subject to new obligations, such as notification requirements, as Crypto Asset management-related service providers. In addition, investment management and investment advice relating to Crypto Assets will be subject to the regulations on investment management business and investment advisory and agency business, respectively.

One of the key issues under Japanese law in respect of DeFi is whether activities involving Decentralized Exchanges (“DEXs”) constitute CAES as defined by the PSA. More specifically, the question is whether developers of DEX smart contracts, providers of user interfaces (“UI”), and large holders of governance tokens are intermediating in the purchase or exchange of Crypto Assets.

Recently, the FSA disclosed the status of its consideration of a policy for DEXs in discussion materials for the Working Group on Crypto Asset Systems of the Financial System Council, which began its deliberations in July 2025. Those materials indicate that, with respect to DEX developers, the FSA intends to consider—while monitoring developments in other jurisdictions—an appropriate regulatory approach tailored to the technical characteristics of protocols that differs from the current regulation of CAESPs. In particular, the materials state that developers who build and deploy DEXs whose protocols cannot be changed after deployment may warrant a regulatory approach distinct from that applied to CAESPs, which suggests that the act of developing an immutable DEX (i.e., a DEX whose protocol cannot be changed) might, at least in some cases, fall outside the scope of the regulations on CAESPs.

The same materials also state that providers of user interfaces (“UIs”) that connect to DEXs could, depending on the outcome of further consideration, be subject to certain conduct based regulations from the perspective of user protection. Specific measures under consideration include a duty to explain risks related to the connected DEX (such as the risk of unexpected losses to users resulting from coding defects) and obligations relating to AML/CFT, including customer identification.

The WG Report, compiled on December 10, 2025, maintained this approach. It noted that, although the development and deployment of DEX protocols may constitute CAES in certain cases under current law, no clear regulatory approach to DEXs has yet been established, and that a regulatory framework tailored to their technical characteristics should continue to be considered while monitoring regulatory developments in other jurisdictions. With respect to providers of UIs connecting to DEXs, the WG Report recommended first deepening the understanding of the actual state of such services, with a view to imposing proportionate regulation, such as a duty to explain risks and AML/CFT obligations including customer identification. Accordingly, the Amended Law does not introduce a specific regulatory framework for DEX developers or UI providers. It should be noted, however, that depending on the specific technical features of a given DEX or UI, existing regulations applicable to CAESPs (and, once the Revised FIEA comes into force, to Crypto Asset Trading Operators) may still apply to the provision of DEX services.

Japanese anti-money laundering regulations are primarily found in the Act on Prevention of Transfer of Criminal Proceeds (“APTCP”). The APTCP sets forth requirements for identity verification and reporting of suspicious transactions, targeting specific business operators, including financial institutions, CAESPs and EPIESPs. Specifically, CAESPs and EPIESPs must (i) conduct KYC checks on customers, (ii) prepare KYC records and transaction records, (iii) keep these records for seven years, and (iv) report suspicious transactions to the relevant authority. CAESPs and EPIESPs are also subject to the Travel Rule. By contrast, ECISBOs are not “specified business operators” under the APTCP and are therefore not themselves subject to its AML/CFT obligations, including KYC obligations. The Amended Law also amends the APTCP so that financial instruments business operators conducting Crypto Asset Trading Business will be specified business operators subject to these obligations once the Revised FIEA comes into force. As CAESP is a concept under the PSA, whether the APTCP applies to DeFi participants will depend on whether their actions constitute CAES under the PSA (or, once the Revised FIEA comes into force, Crypto Asset Trading Business).

As noted above, under the current regulatory framework it is not necessarily clear whether developers of DEXs and providers of UIs fall within the scope of CAESPs and are subject to the APTCP; these matters should be examined on a case by case basis.

With respect to sanctions and cross-border payments, under the Foreign Exchange and Foreign Trade Act (“FEFTA”), a Japanese resident who receives a payment exceeding JPY 30 million from, or makes such a payment to, a non-resident must, subject to certain exceptions (such as payments directly accompanying the export or import of goods), report it to the Minister of Finance. A “payment” for this purpose includes a transfer of Crypto Assets or EPIs.

Under current tax law, there is no particular distinction between Crypto Asset transactions conducted through CAESPs and those conducted through DeFi. However, this will change once the tax reform described below takes effect, because the new separate taxation will apply only to transfers made to Crypto Asset Trading Operators.

Regarding income tax imposed on individuals, profits realised from the trading of Crypto Assets constitute “miscellaneous income” (zatsu-shotoku) for purposes of individual income tax assessment. The tax rate for miscellaneous income is progressive, ranging from 5% to 45% on profits. In addition to this, 10% of such profits are payable to the local government as local inhabitant tax. Losses from Crypto Asset transactions can be offset only against other miscellaneous income; they cannot be offset against other categories of income (such as employment income) or carried forward to subsequent years.

However, the Outline of Tax Reform for Fiscal Year 2026, approved by the Cabinet on December 26, 2025, assumed the amendments to the FIEA and other relevant laws and provided for the following measures, which were subsequently enacted by the Act for Partial Amendment of the Income Tax Act, etc. (Act No. 12 of 2026), passed by the Diet on March 31, 2026:

(i) capital gains and other income from transfers of certain Crypto Assets (i.e., those registered in the register of financial instruments business operators (“Eligible Crypto Assets”), a tax concept that differs from “Specified Crypto Assets” under the Revised FIEA) by residents to a Crypto Asset Trading Operator will be taxed separately at a flat rate of 20% (15% national income tax and 5% individual inhabitant tax, plus the special reconstruction income tax);

(ii) losses from such transfers that remain undeducted may, subject to certain requirements, be carried forward and deducted from such capital gains and other income for the following three years; and

(iii) gains from derivative transactions relating to Eligible Crypto Assets will be added to the separate taxation (and loss carry-forward) regime for futures transactions.

These measures apply to transfers (and, for derivatives, settlements) made on or after January 1 of the year following the year in which the Revised FIEA comes into force. As the Revised FIEA must come into force by July 2027, separate taxation will start on January 1, 2027 or January 1, 2028. The Outline also includes measures for investment trusts investing in Eligible Crypto Assets, premised on amendments to the Order for Enforcement of the Act on Investment Trusts and Investment Corporations.

No consumption tax is payable on the sale or exchange of Crypto Assets. However, consumption tax is currently levied on fees for the lending of Crypto Assets. The Outline of Tax Reform for Fiscal Year 2026 provides that, with effect from January 1 of the year following the year in which the Revised FIEA comes into force, the lending of Crypto Assets will also become non-taxable for consumption tax purposes, and 5% of the consideration for transfers of Crypto Assets will be included in the calculation of the taxable sales ratio.

Furthermore, inheritance tax will be imposed on the estate of a deceased person in respect of the Crypto Assets held by such person.

In respect of corporate tax, corporations holding Crypto Assets with an active market (“Market Crypto Assets”) at the end of a fiscal year are, in principle, required to obtain a market valuation for such assets and include the difference between the market valuation and book value in their profit and loss accounts. This year-end market valuation taxation on corporations applies to unrealised gains, regardless of the purpose for which the Crypto Assets are held. This has been a significant burden on Crypto Asset-related businesses.

To a certain extent, tax reforms implemented in 2023 and 2024 for the purpose of relaxing the year-end valuation taxation have alleviated such a tax burden on corporations. Under the tax reforms, Crypto Assets issued by a corporation that have been continuously held by that corporation itself since their issuance are excluded from market valuation taxation. Additionally, for fiscal years ending on or after April 1, 2024, Crypto Assets can be excluded from mark-to-market taxation if the relevant assets meet all of the following requirements:

(i) the assets are subject to transfer restrictions (such as technical measures that prevent their transfer to others for a certain period) that meet the requirements of the JVCEA rules referred to in the relevant regulations; and

(ii) the holders of which must notify or inform a CAESP that the aforementioned transfer restrictions are in place to enable information on such transfer restrictions to be published by the JVCEA.

No regulatory framework in Japan deals specifically with tokenisation, and there is no formal legal distinction between “retail” and “wholesale” tokenisation. Instead, a tokenised instrument is regulated according to its legal nature and function, mainly (i) as tokenised securities under the FIEA, (ii) as EPIs (i.e., stablecoins) under the PSA, or (iii) as Crypto Assets under the PSA (and, in future, the Revised FIEA).

No.

According to the statistics published by the JVCEA, the total volume of Crypto Asset spot trading handled by its members in fiscal year 2025 (April 2025 to March 2026) was approximately JPY 20.7 trillion. The total volume of Crypto Asset margin trading in the same period was approximately JPY 24.9 trillion. As of the end of March 2026, there were approximately 14.11 million registered accounts.

The JVCEA, a self-regulatory organisation established under the PSA, has established its self-regulatory rules and guidelines regarding Initial Coin Offerings (“ICOs”) for Crypto Asset-type tokens entitled “Rules for Selling New Crypto Asset” (“ICO Rules”). Under the ICO Rules, an ICO can be legally launched in Japan as long as such launch is conducted in compliance with the ICO Rules.

According to the ICO Rules, there are two types of ICO. The first is where a CAESP issues new tokens and sells such tokens by itself. The second is where a token issuer delegates the sale of newly issued tokens to CAESPs. As a general matter, the ICO Rules stipulate the following requirements for each type of ICO:

1. maintenance of a structure for the review of a business that raises funds via an ICO;
2. disclosure of information on the token, the token issuer’s purpose for the funds, and the like;
3. segregated management of funds (both fiat and Crypto Assets) raised by an ICO;
4. maintenance of proper accounting practices and records and financial disclosure of funds raised by an ICO;
5. ensuring the security of newly issued tokens, and of the blockchain, smart contracts, wallet tools, and the like in respect of such tokens; and
6. proper valuation of newly issued tokens.

Additionally, the ICO Rules (as well as the PSA) require an ICO to be implemented in compliance with the following steps:

1. the CAESP that will be handling the ICO token is required to assess both the feasibility of the ICO and the security of such ICO token;
2. the CAESP that will be handling the ICO token is required to prepare and submit a report in respect of item (i) above to the JVCEA for review;
3. if the report is approved by the JVCEA, the CAESP must submit a notification of change in handling Crypto Assets to the FSA; and
4. upon the FSA’s receipt of such notification, the CAESP will be permitted to make the ICO to Japanese residents.

Once the Revised FIEA comes into force, an issuer of Specified Crypto Assets may not make an offering of such Specified Crypto Assets unless it has published “Specified Crypto Asset Information” in accordance with Cabinet Office Ordinance (Article 27-39 of the Revised FIEA). Except where the amount paid by investors is small, such information must be audited by a certified public accountant or an audit firm (Article 27-59 of the Revised FIEA). Solicitations directed only at qualified institutional investors and small-scale solicitations are exempt from the disclosure requirements. Even so, investors must be told at the time of solicitation that such information has not been published (Article 27-49 of the Revised FIEA). Sales of Specified Crypto Assets through a Crypto Asset Trading Operator’s trading platform by persons other than the issuer and persons closely related to it fall outside the concept of “offering “. Instead, a Crypto Asset Trading Operator that starts handling a Crypto Asset for which no Specified Crypto Asset Information has been published must itself publish “Crypto Asset Information” (Article 27-60 of the Revised FIEA). The underwriting, offering of Specified Crypto Assets and the handling of solicitations to acquire them will constitute regulated Crypto Asset Trading Business. In addition, the Revised FIEA expressly prohibits Crypto Asset Trading Operators from handling Crypto Assets that do not meet the standards specified by Cabinet Office Ordinance as necessary to protect the public interest or investors (Article 43-7 of the Revised FIEA). The current screening of new Crypto Assets is therefore expected to be further strengthened.

The legal characteristics of Crypto Assets under the Civil Code of Japan are currently unclear. According to a judicial precedent of the Tokyo District Court dated August 5, 2015, legal ownership or title does not apply to Crypto Assets, as they are intangible assets. As a consequence, the transfer of a Crypto Asset does not equate to the transfer of legal ownership or title in such Crypto Asset under the Civil Code. Similarly, the grant of security over Crypto Assets would also be difficult.

However, a person who deposits Crypto Assets with a CAESP will have a claim against such CAESP for the return of the deposited Crypto Asset under the CAESP’s terms of service, or the like. In such cases, the creditors of the CAESP’s user may create a security over such users’ claim for Crypto Assets against the relevant CAESPs.

In the regulatory context, the APTCP imposes the Travel Rule on the transfer of Crypto Assets and electronic payment instruments (i.e., stablecoins) (“EPI”). The Travel Rule is a system that requires CAESPs and EPIESPs (together, “VASPs”), when transferring Crypto Assets or EPIs, to share certain information about originators and beneficiaries with the relevant beneficiary VASPs. This is to enable tracking of the transaction path of these assets for AML/CFT purposes, in compliance with FATF standards.

There is no clear definition of “smart contracts” under Japanese law, nor are there any specific regulations governing smart contracts.

Smart contracts are generally understood to mean “self-executing contracts containing terms that are pre-determined pursuant to specific programming code”. The use of such smart contracts may raise issues concerning the contract’s validity and its enforceability, although the costs of resolving such issues may be offset by the automation of smart contracts.

For instance, a smart contract based on blockchain technology would be automatically executed and irreversible even if such contract is unenforceable for violating applicable law.

However, the automatic execution of smart contracts is only applicable where the subject of the smart contract is an on-chain asset, such as a Crypto Asset or an EPI. For purposes of enforcing rights against off-chain assets, a party would need to prove in court that the relevant smart contract had been validly concluded based on a meeting of the minds between the parties, as is the case with traditional paper contracts. Currently, there is no known judicial precedent in Japan that explores the issue of validity of smart contracts.

In April 2024, the Liberal Democratic Party, the ruling party in Japan, released a Web3 White Paper 2024, which included a summary of issues needing immediate resolution for the promotion of Web3, as well as proposals for accompanying legislative revisions.

These developments demonstrate that Japan has adopted the promotion of Web3, including NFTs and decentralised autonomous organisations (DAOs), as a national strategy.

Following proposals made in the LDP’s web3 white papers, the FSA amended the Cabinet Office Order on Definitions under Article 2 of the Financial Instruments and Exchange Act (promulgated on April 1, 2024 and effective from April 22, 2024) so that tokenised membership interests in limited liability companies (godo kaisha), which can be used as a legal vehicle for DAOs, are, under certain conditions, excluded from ERTRs and regulated in the same manner as ordinary membership interests. This amendment facilitates the use of limited liability company-type DAOs.

As a result of the leakage of users’ Crypto Assets with a value of approximately USD 530 million from a cyber-attack on one of the biggest CAESPs in 2018, the FSA conducted sweeping on-site inspections on registered and provisional CAESPs. This was followed by the FSA’s announcement, on March 8, 2018, of the imposition of business suspension orders on two provisional exchanges, and business improvement orders on two registered exchanges and three provisional exchanges. After further review, the FSA on June 22, 2018, also imposed business improvement orders on six additional major registered exchanges.

In addition, on June 21, 2019, the FSA imposed a business improvement order on one of the CAESPs for the inadequacy of their business management, anti-money laundering and counter terrorist financing, and risk management systems, among other things.

However, on June 28, 2019, the FSA lifted the business improvement orders it had imposed on three companies, including one of the biggest CAESPs. In August 2020, the FSA also lifted a business improvement order it had imposed on another CAESP.

In November 2022, the FSA issued a business suspension order, a business improvement order, and an order for domestic retention of assets on FTX Japan KK, the Japanese subsidiary of FTX Trading Ltd., due to FTX Japan KK’s suspension of return of customer assets without clear explanation, and concerns over the creditworthiness of its parent company.

Further, on September 26, 2024, in response to the Bitcoin leakage incident that occurred at DMM Bitcoin on 31st May 2024, the FSA issued a business improvement order to DMM Bitcoin, including a specific analysis and investigation of the facts surrounding the leakage incident and the root cause thereof.

The Amended Law, promulgated on July 23, 2026, also significantly increases penalties. The penalty for conducting financial instruments business without registration was raised from up to five years’ imprisonment and/or a fine of up to JPY 5 million to up to 10 years’ imprisonment and/or a fine of up to JPY 10 million, with effect from August 12, 2026 (Article 197(1)(iv-3) of the FIEA, to be renumbered as item (iv-4) when the Revised FIEA comes into force). Once the Revised FIEA comes into force, this penalty will also apply to conducting Crypto Asset Trading Business without registration, which is currently punishable under the PSA by up to three years’ imprisonment and/or a fine of up to JPY 3 million (Article 107(xii) of the PSA).

Business operators using blockchain technology may be subject to the APPI if they handle the personal information of their users.

In addition, considering that a public blockchain involves the sharing of a database among unspecified participants, where information on the blockchain will not in principle be deleted or retracted once recorded on the blockchain, the use of blockchain technology may trigger the application of the APPI. For example, Article 22 of the APPI requires business operators handling personal information to endeavour to delete personal data without delay once it is no longer needed for the purpose of use. In addition, a data subject may, in certain circumstances, request the cessation of use or deletion of his or her retained personal data (Article 35 of the APPI). However, a business operator that records the personal data of its users on a blockchain may have difficulty deleting such information, which could make it difficult to comply with these requirements.

In recent years, developments such as the listing of spot Bitcoin ETFs in several countries outside Japan have accelerated the treatment of crypto assets as investment assets both in Japan and abroad. At the same time, there has been a rise in fraudulent investment solicitations, creating a growing need for more robust user protection measures. In response to these developments, on April 10, 2025, the FSA published a Discussion Paper entitled “Examination of Institutional Framework for Crypto assets and Related Matters” (the “Discussion Paper”) to create an environment that balances user protection with the promotion of innovation.

Following the Discussion Paper, the Working Group on Crypto Asset Systems compiled the WG Report on December 10, 2025. Based on it, the Amended Law was approved by the Cabinet on April 10, 2026, passed by the Diet on July 15, 2026 and promulgated on July 23, 2026. The Revised FIEA will come into force on a date specified by Cabinet Order within one year from promulgation (i.e., by July 2027 at the latest)[8]. The WG Report noted that most Crypto Asset transactions are made in expectation of returns from price movements, which fits the concept of “investment characteristics” regulated under the FIEA. On the other hand, Crypto Assets generally do not represent legal rights or involve distributions of dividends or residual assets. Crypto Assets are therefore placed in a regulatory category distinct from securities.

The key features of the Revised FIEA include the following:

• Issuer disclosure: The Discussion Paper had distinguished between fundraising-type and non-fundraising-type Crypto Assets. The Revised FIEA instead designates Crypto Assets that only a specific person has the authority to issue (and similar Crypto Assets specified by Cabinet Office Ordinance) as Specified Crypto Assets, and imposes securities-like disclosure obligations on their issuers (Articles 2(50) and 27-39 of the Revised FIEA). The scope of Specified Crypto Assets is likely to remain a key point of discussion in the drafting of the Cabinet Office Ordinance.
• Registration: CAESPs will be brought into the financial instruments business framework as Crypto Asset Trading Operators. Financial instruments business operators that wish to start Crypto Asset Trading Business will need to obtain a change of registration. Existing CAESPs will need to establish operational management systems equivalent to those of financial instruments business operators, build up liability reserves and calculate capital adequacy ratios. As a transitional measure, existing CAESPs may continue their business for six months from the effective date and, if they apply for registration within that period, until a decision is made on the application (but not beyond two years from the effective date).
• Expanded scope: Crypto Asset borrowing will be regulated as a type of Crypto Asset Trading Business, and a special registration regime will apply to businesses conducting only Crypto Asset borrowing and similar activities (Article 29-6). Providers of Crypto Asset management-related services will be subject to notification requirements and other obligations. Investment management and investment advice relating to Crypto Assets will also be regulated.
• Unfair trading: Insider trading regulations and other unfair trading regulations, such as the prohibition of stabilisation transactions, will be introduced (see below). Penalties for unregistered business have also been significantly increased.
• Related reforms: Separate taxation at a flat rate of 20% has been enacted for certain Crypto Asset transactions (see question 7 above). The Order for Enforcement of the Act on Investment Trusts and Investment Corporations is expected to be amended to allow Crypto Asset ETFs.

Under the current FIEA, insider trading in Crypto Assets is not regulated. This is because it has been difficult to formulate a clear concept of Crypto Asset issuers and to identify undisclosed material facts. The Revised FIEA, however, establishes insider trading regulations for Crypto Assets based on the framework for listed securities (Articles 171-7 to 171-10 of the Revised FIEA). In principle, insiders of issuers of Specified Crypto Assets, insiders of Crypto Asset Trading Operators and persons related to large-volume traders will be prohibited from trading Crypto Assets handled (or decided to be handled) by domestic Crypto Asset Trading Operators before the relevant material facts are publicly announced. They will also be prohibited from communicating such facts or recommending trades to others for the purpose of enabling them to profit. Crypto Asset Trading Operators and issuers of Specified Crypto Assets will therefore need to set up insider trading prevention and information management systems before the Revised FIEA comes into force.

Many of the specific details have been left to Cabinet Orders, Cabinet Office Ordinances and supervisory guidelines to be developed before the Revised FIEA comes into force. Practitioners should therefore keep monitoring developments closely.