Japan FSA May Let Banks Hold Bitcoin, And Other Cryptos

Japan’s financial regulator, the Financial Services Agency (FSA), is reportedly considering allowing domestic banks to hold Bitcoin (BTC) and other cryptocurrencies on their balance sheets.

Overview

According to a Sunday report from Livedoor News, the move would mark a major policy shift, as current supervisory guidelines—revised in 2020—effectively ban banks from holding crypto due to volatility risks. At the same time, it forms part of Japan’s broader effort to modernise its financial system and establish itself as a leading hub for digital assets in Asia.

If implemented, this policy shift would mark a significant departure from the existing regulatory framework, which restricts traditional financial institutions from directly holding cryptocurrencies. Currently, banks in Japan can only engage with digital assets through affiliated subsidiaries or investment vehicles, such as trusts or crypto custody services.

The FSA’s review reportedly stems from growing institutional demand for exposure to digital assets, both as investment instruments and as payment infrastructure. Japanese megabanks—including Mitsubishi UFJ Financial Group (MUFG), Mizuho Financial Group, and Sumitomo Mitsui Banking Corporation (SMBC)—have all shown increasing interest in blockchain technology and tokenised assets in recent years.

This potential change aligns with Japan’s broader push to foster innovation in Web3, tokenised securities, and stablecoins, areas where the government has already introduced supportive regulations. The FSA’s move could bridge the gap between traditional finance and the crypto sector, allowing Japan’s banks to play a more active role in digital asset management.

Balancing Innovation and Risk

While the proposal signals Japan’s growing openness toward crypto integration, the FSA is expected to take a cautious approach. Allowing banks to hold cryptocurrencies raises questions about market volatility, custodial risk, and compliance with international financial standards.

Sources indicate that any new rule would likely come with strict conditions on how banks manage and report their crypto holdings. Banks may be required to maintain high capital reserves, implement advanced cybersecurity measures, and adhere to anti-money laundering (AML) and know-your-customer (KYC) protocols.

The FSA’s move reflects Japan’s pragmatic regulatory philosophy—encouraging innovation while maintaining financial stability. Japan has been a pioneer in crypto oversight since the 2014 Mt. Gox collapse, which prompted the introduction of one of the world’s first comprehensive digital asset frameworks. 

Today, Japan requires all crypto exchanges to register with the FSA and comply with strict operational standards, including asset segregation and customer protection measures. Financial analysts believe that extending this regulatory clarity to banks could enhance institutional confidence in the crypto sector.

“Japan is signalling that it sees digital assets not as a threat, but as an opportunity to modernise its financial system,”

said one Tokyo-based economist.

“The key will be managing the balance between innovation and risk.”

Strengthening Japan’s Position in the Global Crypto Landscape

If Japan proceeds with this initiative, it could strengthen its role as a global leader in responsible crypto adoption. In recent years, the country has sought to attract blockchain startups and promote yen-pegged stablecoins issued by major financial institutions. Allowing banks to hold BTC and other cryptocurrencies would further legitimise digital assets as part of mainstream finance.

The change could also boost Japan’s competitiveness against regional rivals such as Singapore and Hong Kong, which have been actively positioning themselves as crypto-friendly financial centres. With Japan’s reputation for robust consumer protection and transparent oversight, it could offer a safer, more regulated alternative for global crypto businesses and investors. Moreover, Japan’s push could have ripple effects across global markets. 

If traditional financial institutions begin holding BTC, it may increase institutional demand and signal growing acceptance of cryptocurrencies as legitimate financial assets. For Japanese consumers, it could also open the door to new products—such as crypto savings accounts, loans backed by digital assets, and seamless integration between fiat and crypto payments.

While the FSA has not yet provided a definitive timeline, industry observers expect further details in the coming months. The agency’s decision could pave the way for a new era in Japanese finance, where Bitcoin and blockchain technology coexist with traditional banking to shape the future of money.