Japan's Comprehensive Legal Framework for Cryptocurrency Regulation

Japan has established a robust legal framework for cryptocurrency, recognizing digital assets as legitimate forms of payment under the Payment Services Act. The Financial Services Agency (FSA) serves as the primary regulatory authority, mandating that all cryptocurrency exchange operators register and comply with strict standards concerning user protection, financial disclosures, and anti-money laundering (AML) protocols. This regulatory approach was solidified through amendments to the Payment Services Act, which took effect in April 2017, positioning Japan as a pioneer in formal crypto regulation.

Under this framework, registered crypto-asset exchange service providers are obligated to implement measures such as segregating customer assets from company funds, disclosing contract terms and fees, and providing clear explanations about the nature and risks of crypto assets. These requirements aim to ensure transparency and safeguard users from potential financial losses.

Crypto Asset Exchange Service Providers are required to register with the FSA and must meet the following requirements: to provide information on contract details and fees; advertising and solicitation regulations; to publish a balance sheet and an income statement; to explain the nature of crypto assets to user (1).

Beyond exchange regulation, Japan has implemented policies addressing the broader crypto ecosystem. For instance, the FSA has centralized jurisdiction over financial stability, user protection, and AML/CFT (Combating the Financing of Terrorism) measures, developing a comprehensive regulatory framework to address these areas. Additionally, in response to concerns about unlawful money transfers, the FSA, in collaboration with the National Police Agency, has encouraged financial institutions to strengthen user protection measures against such transfers to crypto-asset exchange service providers.

Source:
(1) Financial Services Agency
(2) Library of Congress

Last updated: 08-05-2025 Disclaimer: This article does not provide legal advice. If you need legal advice, please contact an attorney directly.