Japan Emerges as Potential Demand Giant for Bitcoin Following Rule Changes

Although Japan only has 20,000 to 40,000 active BTC addresses every day, the vast household wealth could flow in through ETFs and regulated funds.

Japan has officially finalized changes to its crypto regulatory framework that have the potential to increase global demand for Bitcoin.

The reforms aim to clarify liability for deprivation of liberty, encourage institutional participation and position the country as a safe haven for digital assets.

Reforms could boost demand for Bitcoin

According to crypto research and education institution XWIN Research Japan, the Financial Services Agency (FSA) has done just that completed its 2025 Working Group on Crypto Asset Reform, which outlines a redesign of the country’s rules. Central to this effort is the transition from the Payment Services Act to the Financial Instruments and Exchange Act, which will provide stronger investor protection.

Notably, the country’s on-chain activity remains limited, with only 20,000 to 40,000 unique active Bitcoin addresses per day, compared to a global range of 450,000 to 800,000. This means that it only has a small share of global demand in the chain.

However, the report notes that this view is incomplete because Japan has one of the largest sources of household wealth in the world, which could make the country a major source of new demand if it could participate through ETFs, regulated funds or other institutional products.

“With greater credibility and easier access for large asset managers, Japan could ultimately exert measurable upward pressure on Bitcoin’s long-term supply and demand dynamics,” the market watchers wrote.

Japan tightens crypto rules

The Asian economic powerhouse’s new regulatory approach focuses on protecting investors, recognizing that crypto has become a mainstream investment even as fraud, unregistered platforms and information gaps continue to grow.

The changes will introduce new measures including clear disclosures, rules against unfair trading, explanations of issuer risks, stronger security and closer supervision of business conduct. The FSA plans to take more action against unregistered overseas services and is considering creating a separate category for decentralized exchanges.

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According to Nikkei, the company is also preparing rules that will require local digital asset exchanges to maintain liability reserves to protect users from hacks and other operational issues. The agency will submit the amendments to Parliament in 2026 and is also expected to classify cryptocurrencies as securities under the Financial Instruments and Exchange Act.

If approved, crypto platforms would face a ban on insider trading, stricter custody audits and broader disclosure requirements, bringing crypto rules closer to those of traditional financial firms.

These reforms are Japan’s first major step toward creating a transparent, secure, and institution-friendly crypto market. The announcement also comes weeks after reports that the FSA is considering allowing banks to hold and trade digital assets such as Bitcoin.

CryptoQuant predicts that the steps taken could put positive pressure on Bitcoin supply and demand in the long term.