Japan has one of the world’s most advanced crypto regulatory regimes, and it long predates Europe’s MiCA. Under the Payment Services Act (PSA) (revised 2017), Japan began licensing crypto exchanges (known as Crypto-Asset Exchange Service Providers (CAESPs)). All crypto exchanges must register with the Financial Services Agency (FSA) and meet strict conduct rules (segregated customer custody, audited accounts, and all). Japan was “the first jurisdiction to formally regulate crypto-asset transactions,” as Tokio Morita of FinCity.Tokyo notes, “laying groundwork that later influenced frameworks such as Europe’s MiCA.”
Unlike a single MiCA code, Japan’s rules are spread across existing laws: cryptocurrencies (BTC, ETH, others) are defined as “cryptoassets” under the PSA, whereas tokens tied to securities (equity, bonds, or fund shares) are governed by the Financial Instruments and Exchange Act (FIEA) as “transferable rights”.
How Japan Classifies Crypto, Tokens, and Stablecoins
1. Cryptoassets (PSA):
Bitcoin, Ether, and similar tokens are regulated as cryptoassets under the PSA. Exchange operators must register as licensed CAESPs with the FSA. Custodial wallets must be segregated (e.g.,≥95% of user funds in offline wallets) and user assets must be audited annually. Anti-money-laundering (AML) rules and full KYC apply to transactions.
2. Security Tokens (FIEA):
Any token that represents shares, bonds, or investment fund interests is treated as a security token (electronic transferable rights under FIEA). Handling or selling these tokens requires a Type I financial instruments licence. Japan has also created a bespoke but little-used framework (Act on Electronic Transferable Rights) to register certain tokenized securities with the government.
3. Stablecoins:
In June 2022, Parliament passed an amendment expressly recognizing fiat-pegged tokens as “electronic payment instruments” (EPI), effectively digital money. This law (effective 1 June 2023) only permits banks, licensed money-transfer agents, and trust companies to issue stablecoins. These stablecoins must be fully backed by currency reserves and held under segregated custody (often via licensed custodians). This mirrors traditional e-money rules. Algorithmic or crypto-backed “stablecoins” remain classified simply as cryptoassets (regulated under the PSA/FIEA, not as EPIs). Japan’s first regulated yen stablecoin (JPYC), the first under the 2023 EPI framework, was approved in 2025.
Japan’s Key Legislative Milestones
Here are Japan’s key legislative milestones since 2017:
- April 2017: Revised PSA introduces crypto exchange licensing.
- May 2020: Enhanced user-protection rules take effect (custody segregation, banning commingling, stronger AML).
- June 2022: Diet passes Stablecoins Amendment Act; defines fiat-pegged coins as EPIs and establishes registration for issuers/distributors.
- June 2023: Stablecoin framework enforced. Stablecoins are regulated with full-reserve, custodial, and KYC safeguards.
- 2025 (proposed): New licenses for crypto asset intermediaries (brokers/traders) under the PSA/FIEA are under discussion, and the FSA is considering shifting many crypto regulations into the securities law realm.
Retail Protection and Institutional Expansion
Even without a unified “crypto code” like MiCA, Japan’s multi-pronged approach covers retail and institutional needs. Domestic retail users and exchanges face strict oversight: only FSA-registered platforms may service Japanese customers, customer funds must be ring-fenced, and all service providers must conduct AML checks. The FSA also recently signaled it will treat user crypto holdings increasingly as investment products, not just payment tokens. For example, derivatives on overseas crypto ETFs have been banned locally to protect retail investors.
At the same time, institutional frameworks are expanding. Stablecoins are now an acknowledged payment option (with stringent issuance rules), and Tokyo’s major banks (MUFG, SMBC, Mizuho) are jointly piloting fiat stablecoins for corporate settlements.
Tokenization of bonds and real estate is nascent but growing, with security tokens traded under FIEA and experimental digital bonds on the horizon. Japan’s tax authorities are also weighing a lower flat tax on crypto gains (~20%) to encourage market activity.
Tokyo’s Role as a Fintech and Web3 Hub
Tokyo’s government has complementing initiatives. FinCity.Tokyo, backed by the Tokyo Metropolitan Government (TMG) and industry, actively attracts Web3 startups. It “connects the right stakeholders” by offering a one-stop, English-speaking office to guide foreign firms through licensing and launch. FinCity collaborates with the national FSA and global regulators (MAS, SEC, others) to give feedback on policy, and helps firms with office setup, visas, and local networking.
Likewise, Invest Tokyo promotes fintech relocation, and programs like the FinTech Proof-of-Concept Hub and new “Payment Innovation Project” provide government-backed sandbox support for blockchain experiments. Governor Yuriko Koike’s digital agenda (GovTechTokyo) also fosters a pro-innovation climate, though it is broader than just crypto.
In short, Tokyo is positioning itself as a stable, regulation-friendly hub: as Morita emphasizes, Japan’s approach “is very stable” and focused on trust and protection, even if it may seem “rather slow” by some measures.
Regulatory Thinking Is Shifting
Japan’s regulators themselves stress ongoing refinement. Financial Services Agency of Japan’s (JFSA) chief FinTech lead Ryosuke Ushida notes that Japan “already [has] a comprehensive framework for crypto assets, stablecoins and… tokenized securities,” and that rules are updated annually to keep pace.
He added that stablecoins (issued by banks, PSPs, or trust companies) “immediately” fall under PSA regulation like crypto exchanges, with strong investor protections. Security token offerings use the FIEA framework, reflecting their economic substance. Both he and the industry acknowledge a shift in thinking. Regulators are now viewing crypto transactions more like securities offerings rather than mere payments, which may trigger tighter disclosure and market rules ahead.
Japan’s De Facto MiCA Equivalent
In summary, Japan’s digital regulatory guideline is not a single new statute, but a combination of laws enforced by the FSA. It balances rigorous user protections for retail and exchange activities with rules facilitating institutional adoption (tokenization and regulated stablecoins). Tokyo’s local governments play a key supporting role through fintech promotion and international outreach.
As Tokio Morita of FinCity observes, Tokyo offers “ample opportunity…for ventures operating in digital assets and Web3-enabled investment products.”
This blend of national oversight and local innovation makes Japan a leading, if cautious, crypto jurisdiction. One that influenced MiCA and continues to adapt its “everything–blockchain” strategy.
Author: Ayanfe Fakunle
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organizations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
See Also:
10% of Global Crypto Users are in China where Crypto is Illegal | Disruption Banking
How Strong Will the Japanese Yen (JPY) Be In 2026? | Disruption Banking
