Japan’s Financial Regulator Plans New Rules for Exchange Technology Partners

Japan’s Financial Services Agency (FSA) is preparing to introduce new rules that would require digital asset custody providers and trading system operators to formally register with regulators before servicing crypto exchanges, according to a report from Nikkei.

The proposal, discussed on Nov. 7 by a working group under the Financial System Council, seeks to close major security gaps in Japan’s digital asset framework. While exchanges are already mandated to safeguard user assets – including keeping most funds in cold storage – third-party custodians and trading management services currently operate without equivalent regulatory oversight.

Closing the Loophole After the DMM Bitcoin Breach

The FSA’s initiative follows a series of high-profile incidents, most notably the 2024 DMM Bitcoin hack, which saw roughly 48.2 billion yen ($312 million) worth of Bitcoin stolen. Investigators later traced the breach to Tokyo-based software firm Ginco, a third-party provider managing DMM’s trading systems.

The FSA now plans to ensure that exchanges only partner with registered custodians and technology providers, aiming to prevent similar vulnerabilities in the future. Members of the working group broadly backed the proposal, emphasizing the need for clearer operational standards and accountability across Japan’s crypto sector.

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Legislative Path and Broader Policy Direction

The agency is expected to finalize a report and propose amendments to the Financial Instruments and Exchange Act during the 2026 parliamentary session. The changes would formally extend Japan’s regulatory perimeter to include service providers indirectly connected to crypto trading operations.

At the same time, Japan continues to push forward with innovation in stablecoins and blockchain-based finance. The FSA recently approved JPYC, the country’s first yen-pegged stablecoin, and last week announced support for a new pilot program involving major domestic banks – Mizuho, MUFG, and SMBC – to test stablecoin interoperability and infrastructure.

By combining tighter oversight with a push for regulated innovation, Japan is positioning itself as one of the few major economies aiming to balance crypto security and financial modernization.