Crypto Exchange Regulations in Japan by FSA: What You Need to Know in 2026

Japan doesn’t mess around with crypto. If you want to run a crypto exchange there, you don’t just file some forms and wait for approval. You build a legal entity, hire compliance teams, set up a physical office in Tokyo or Osaka, lock up 95% of customer coins in cold storage, and prove you can protect money better than a bank. And that’s just to get started.

Why Japan’s Rules Are Different

Most countries treat crypto like a wild west experiment-some rules here, a few guidelines there, and hope nothing blows up. Japan? They learned from the Mt. Gox collapse in 2014, where 850,000 bitcoins vanished and customers lost everything. After that, they didn’t just tighten rules-they rebuilt the entire system from the ground up.

The Financial Services Agency (FSA) didn’t just add a few checkpoints. They created a legal framework so strict it’s become the global gold standard. Two laws govern everything: the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA). The PSA sets the baseline: if you handle crypto in Japan, you need an FSA license. No license? You’re breaking the law. Simple as that.

The Licensing Hurdles You Can’t Skip

Getting licensed isn’t about filling out a form. It’s a full corporate overhaul. You need to be a Japanese Kabushiki Kaisha-a joint-stock company registered under Japanese corporate law. Minimum capital? Over 10 million yen (about $65,000 USD), but most serious players put in way more. You need a physical office in Japan, not just a PO box. You need a Japanese bank account. And you need at least two qualified compliance officers who understand AML and CFT rules inside out.

The FSA doesn’t just check paperwork. They send inspectors. They interview staff. They dig into your internal controls. They want to know how you train employees, how you handle customer complaints, how you respond to hacks. If your risk management plan looks like it was written in 30 minutes, you’re rejected.

The Cold Wallet Rule That Changed Everything

Here’s the rule that makes Japan unique: 95% of customer crypto must be stored offline in cold wallets. That means no internet connection. No remote access. No chance for hackers to swipe it remotely.

If you want to keep any coins online-in a hot wallet-you have to back every single yen’s worth of it with your own money. So if you hold $1 million in hot wallets, you must keep $1 million in cash or assets on reserve to cover potential losses. That’s not a suggestion. It’s the law. And it works. Japan has had zero major exchange hacks since 2018-not because hackers gave up, but because they couldn’t get to the money.

This isn’t just security. It’s accountability. The exchange eats the loss, not the user. That’s why Japanese exchanges are trusted more than almost any others in the world.

Big Changes Coming in 2026

In June 2025, the FSA announced a major shift: they’re moving crypto oversight from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA). Why? Because many tokens aren’t just digital money-they’re investments.

Tokens that give you voting rights, profit-sharing, or promise returns? Those now fall under securities law. That means issuers must file disclosures, follow insider trading rules, and provide real financial statements. It also opens the door for regulated spot Bitcoin ETFs in Japan-something the U.S. is still struggling with.

The new bill is expected to pass in early 2026. Once it does, Japan will have the most advanced crypto securities framework in the world. No more gray areas. No more “this token is a utility” excuses. If it acts like a stock, it’s regulated like one.

What This Means for Investors and Traders

For users, this is good news. Exchanges that are FSA-licensed are safer. Your coins are protected. Your personal data is handled properly. You’re less likely to fall for a scam.

But there’s a catch: taxes. Right now, profits from crypto trades in Japan are taxed up to 55%. That’s higher than the top income tax rate in the U.S. and way above the 20% rate for stocks and bonds. The FSA knows this is a problem. They’re pushing for reform to align crypto taxes with traditional investments. If that happens in 2026, trading volume could jump by 30% or more.

DeFi and the Future

Japan isn’t ignoring decentralized finance. The FSA created a DeFi Study Group that meets every two months with academics, developers, and exchange operators. They’re trying to figure out how to regulate smart contracts, liquidity pools, and automated protocols without killing innovation.

No one has the answers yet. But Japan is the only country actively building a regulatory path for DeFi-not banning it, not ignoring it, but trying to understand it. That’s why global DeFi projects are watching Japan closely. If they can make it work here, other countries will follow.

Who’s Winning in Japan’s Crypto Market?

As of 2025, Japan has 18.69 million crypto users-nearly 15% of the population. The market is worth $2 billion and growing at 3.44% annually. The big players? BitFlyer, Coincheck, and Zaif. All FSA-licensed. All operating under the same strict rules.

Even public companies like Metaplanet hold billions in Bitcoin, not because they’re gambling, but because they trust the system. Japan’s regulations aren’t just about control-they’re about trust. And trust drives adoption.

Why Other Countries Look to Japan

The U.S. has 12 different agencies claiming jurisdiction over crypto. The EU has MiCA, but enforcement is still patchy. Singapore lets exchanges operate with light oversight. Japan? One regulator. One set of rules. One clear path.

That’s why regulators from South Korea, Canada, and even the UK send teams to Tokyo to study Japan’s model. They don’t copy it exactly-they can’t, because Japan’s system is built on decades of financial discipline. But they borrow the core ideas: clear licensing, cold storage mandates, strict AML, and treating crypto like real finance, not a novelty.

What Happens If You Try to Skip the Rules?

Some foreign exchanges try to target Japanese users without registering. They use English websites. They accept yen. They promise low fees. Then they disappear.

The FSA doesn’t just shut them down. They publish lists of unlicensed operators. They warn users. They work with banks to freeze accounts tied to illegal platforms. In 2024, the FSA blocked 17 offshore exchanges from operating in Japan. One of them was a well-known platform that claimed to be “based in the Cayman Islands.” The FSA didn’t care. If you serve Japanese customers, you play by Japanese rules.

There’s no loophole. No gray zone. No “we’re just a tech company.” If you touch crypto in Japan, you’re regulated.

Final Take: Is Japan Too Strict?

Yes. It’s expensive. It’s slow. It’s hard for startups. But it works.

You won’t find a single major crypto scam in Japan. You won’t find users losing life savings to exchange failures. You won’t find regulators saying, “We’re still figuring it out.”

Japan’s system isn’t perfect. The tax rate is still too high. Innovation moves slower than in Dubai or Switzerland. But when it comes to protecting ordinary people from fraud, theft, and deception? No one does it better.

If you’re thinking of launching a crypto exchange anywhere in the world, look at Japan. Not to copy it-but to understand what real consumer protection looks like. Because in crypto, trust isn’t a feature. It’s the only thing that lasts.