According to reports, Japan’s Financial Services Agency is preparing new rules that would force companies providing crypto exchange management systems to provide advance notice or registration before starting work.
The proposal was discussed during a working group meeting on November 7. Regulators say the move is intended to tighten controls on third-party companies that operate trading systems or custody services for exchanges.
Working group will tighten the rules
Under current law, exchanges must follow strict rules for holding users’ funds, including storing funds in cold wallets. But third-party vendors who use trading software or custodial agents operate without the same legal footprint.
Regulators say this gap leaves room for mistakes and security leaks. The plan would require exchanges to only do business with registered providers, creating a clearer line of responsibility.
Registration can increase accountability
Most members of the working group that reviewed the draft supported a registration systembased on reports. They told the council that a formal list of approved providers would increase transparency and make it easier to apply consistent standards across the board.
If adopted, the system will likely include checks on security practices, rules for reporting incidents and clearer rules for who is responsible if something goes wrong.
Plans for legal changes and a timeline
The FSA plans to produce a full report of the discussions and push for changes to the Financial Instruments and Exchange Act during the 2026 ordinary parliamentary session.
That timeline gives lawmakers time to consider the details and for industry groups to voice their opinions. Some in the market warn that the new rules could mean additional compliance work for smaller suppliers. Others say this could be a fair trade for better customer protection.
Image: Penn Today
Image: Penn TodayStablecoins and pilot projects
Based on reportsthe FSA does not only focus on custody. The agency has also expressed interest in promoting regulated stablecoin work in Japan. In October 2025, the FSA approved JPYC, the country’s first yen-pegged stablecoin, which was launched shortly afterwards.
The regulator has also supported a pilot stablecoin effort involving major banks MUFG, SMBC and Mizuho Bank.
The DMM crypto incident that changed attitudes
The push for change accelerated after a major hack in 2024. Reports have revealed that hackers stole more than 48 billion yen – approximately $311 million – worth of Bitcoin from DMM Bitcoin.
Investigators later traced the breach to Ginco, a Tokyo-based company that operated parts of DMM’s trading system. That case highlighted to many officials that outsourcing critical operations can spread risks beyond the exchange itself.
Featured image from Unsplash, chart from TradingView
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