Japan’s Financial Services Agency (FSA) is reportedly considering significant reforms that would allow domestic banks to acquire and hold digital assets, including Bitcoin, for investment purposes. This move represents a major shift from the conservative stance established in 2020, when local banks were explicitly barred from holding cryptocurrencies due to prevailing concerns over volatility and financial stability.

Under the proposed framework, Japanese banks would be empowered to trade digital assets similarly to how they currently handle stocks and government bonds. To ensure financial soundness and mitigate risks, specific safeguards are expected to be implemented. The FSA plans to develop robust risk management protocols to cushion the impact of sudden price fluctuations on banks’ balance sheets. These reforms are slated for discussion in an upcoming Financial System Council working group meeting, an influential advisory body to the Prime Minister. Officials are also reportedly exploring mechanisms that would enable banking groups to register as licensed cryptocurrency exchange operators, thereby integrating them more deeply into the digital asset ecosystem.

The context for these potential changes dates back to 2020, when Japan enforced strict cryptocurrency regulations through amendments to its Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA). These legislative updates established a comprehensive framework governing crypto asset service providers, custodial businesses, and derivatives trading. By involving established and regulated banks directly, regulators now hope to foster a safer and more stable environment for crypto investment while expanding access to digital assets across Japan.

The timing of these proposed reforms also coincides with Japan’s economic challenges. The nation currently holds a debt-to-GDP ratio of approximately 240%, one of the highest globally. This financial strain has prompted policymakers to explore various tools to manage the burden, including persistent low interest rates and targeted regulatory adjustments. In such an environment, digital assets could offer investors alternative avenues for returns outside traditional financial systems, potentially spurring broader adoption.

Japan’s cryptocurrency market has seen rapid growth in recent years. As of February 2025, the country had over 12 million registered cryptocurrency accounts, a 3.5-fold increase compared to five years earlier. Major Japanese banks have already shown strong interest in expanding their crypto-related services. Notably, Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corp., and Mizuho Bank have collaborated on initiatives to issue stablecoins pegged to both the Japanese yen and the U.S. dollar, demonstrating early engagement in the digital asset sector.

A compelling example of Japan’s evolving crypto landscape comes from Metaplanet, a company that has strategically acquired and held Bitcoin as a treasury reserve asset. Moreover, Metaplanet has launched Bitcoin-backed financial products designed to generate income within Japan’s low-yield market environment. The company employs a capital-raising strategy involving equity and preferred shares, similar to institutions like MicroStrategy, to fund its Bitcoin purchases, highlighting innovative approaches to digital asset integration within Japan’s financial ecosystem.