Japan Revises Crypto Law to Prevent Asset Outflows, Strengthen Investor Protections

The key reform: a domestic asset holding requirement aimed at curbing the risks associated with overseas crypto exchange collapses.

Why Japan Amended Its Crypto Regulations

The move follows growing concern over the bankruptcy risks of foreign crypto exchanges and the resulting losses for Japanese investors. In a high-profile 2024 incident, a Japanese crypto exchange suffered a security breach that led to the theft of over $305 million in Bitcoin, triggering calls for stronger safeguards and tighter regulatory oversight.

Key Provisions in the Revised Payment Services Act

Mandatory Domestic Asset Custody

Crypto exchanges operating in Japan must now store customer assets domestically, ensuring funds remain secure even if foreign exchanges go under.

New Intermediary Framework

The law introduces a flexible business model that enables in-app crypto usage, especially for blockchain-integrated games and services.

Trust-Type Stablecoin Reforms

Stablecoin issuers are now permitted to hold up to 50% of reserves in low-risk assets, balancing innovation with financial stability.

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Stricter Registration and Compliance Standards

All crypto businesses must register under the revised PSA and adhere to enhanced AML (Anti-Money Laundering) and CFT (Counter Financing of Terrorism) protocols.

A Proactive Approach to Market Resilience

With this latest revision, Japan continues to position itself as one of the world’s most proactive regulators of digital assets. The law reflects a broader strategy to support responsible innovation while minimizing systemic risk for retail and institutional investors alike.

Source

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