Cryptocurrency Regulation in Japan
Japan is crypto-progressive, in general, but very much regulated. After legalising Bitcoin as a payment method in 2016, legislators have developed a thick rule-book to balance innovation and consumer protection. Stablecoin issuers, exchanges, and token-offering platforms have to negotiate one of the most elaborate compliance frameworks in the world – otherwise, they are welcome to criminal charges.
Investors, corporates and Web3 start-ups should be aware of Japan’s framework: licensing is expensive, taxes are high, and AML obligations are onerous, but regulatory certainty opens the door to a wealthy tech-savvy population. Oversight is split three ways between the Financial Services Agency (FSA) which establishes and regulates financial policies, the Bank of Japan which directs monetary policy and CBDC trials, and the Japan Virtual & Crypto Assets Exchange Association (JVCEA) which is a recognised self-regulatory organisation.
Historical Context
The Mt. Gox meltdown (2014) was the initial taste of crypto fame in Japan, and it elicited discussion (and not banishment). In 2016, the Payment Services Act (PSA) was amended to formally define a virtual currency and introduce exchange registration – the first in the world. Then two high-profile exchange hacks (Coincheck 2018; DMM Bitcoin 2024) led the FSA to strengthen custody and cold-wallet requirements and audit requirements.
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