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- Japan’s FSA plans stricter oversight for crypto custody and trading system providers.
- Exchanges may soon be required to use only FSA-registered service platforms.
- The move follows a major Bitcoin theft that exposed regulatory gaps.
Japan’s Financial Services Agency (FSA) is preparing a major shift in how crypto service providers operate. The regulator is planning a new framework that would require custody and trading management providers to register before offering services to cryptocurrency exchanges.
This step aims to strengthen transparency, ensure operational security, and prevent further digital asset leaks. The proposal was discussed during a Financial System Council meeting, an advisory body to the Prime Minister.
Officials noted that the rise in crypto-related fraud and system breaches has created an urgent need for oversight. The FSA believes that pre-registration will allow better monitoring of companies managing sensitive digital infrastructure used by crypto exchanges.
Japan Tightens Rules After Major DMM Bitcoin Hack
The push for regulation follows the 2024 security breach at DMM Bitcoin, where hackers stole 48.2 billion yen worth of Bitcoin. Investigations revealed that DMM had outsourced transaction management to Ginco, a Tokyo-based software company.
Hackers exploited vulnerabilities in this outsourced system, highlighting how third-party risks can endanger exchange customers. Under the new plan, only registered and verified companies will be allowed to provide custody or transaction systems.
Exchanges must rely exclusively on these approved platforms to protect investors and maintain accountability. Lawmakers argue that crypto exchanges alone cannot bear full responsibility when external providers control parts of their systems.
Committee members at the meeting largely agreed that the framework is necessary. Many emphasized the need for clearer rules on outsourcing and accountability. They suggested additional standards to assess the reliability and resilience of third-party systems handling large volumes of customer assets.
Japan Moves to Strengthen Crypto Regulation Framework
The FSA intends to finalize its report in the coming months and submit a bill to amend the Financial Instruments and Exchange Act during the next Diet session. The proposed amendments will define new registration procedures, compliance obligations, and penalties for unregistered service providers.
This marks another phase in Japan’s long-term effort to stabilize its crypto ecosystem. The country has been a global leader in digital asset regulation since the Mt. Gox collapse in 2014. With this new proposal.
The FSA seeks to close loopholes and strengthen trust in a market still recovering from past security lapses. If approved, the new framework will reshape how Japan’s crypto industry manages digital assets, setting a higher benchmark for security and governance in the global market.
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