Japan Eyes Stricter Oversight On Crypto Management Companies

According to reports, Japan’s Financial Services Agency is preparing new rules that would force companies providing management systems to crypto exchanges to give prior notice or register before they start work. The proposal came up for discussion at a working group meeting on November 7. Regulators say the move is meant to tighten checks on outside firms that handle trading systems or custody services for exchanges. Work Group Moves To Tighten Rules Under current law, exchanges must follow strict rules for holding users’ money, including storing funds in cold wallets. But outside vendors that run trading software or custody tools operate without the same legal footprint. Regulators say that gap leaves room for mistakes and security holes. The plan would require exchanges to deal only with registered providers, creating a clearer line of responsibility. Registration Could Raise Accountability Most members of the working group that reviewed the draft supported a registration system, based 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 passed, the system would likely include checks on security practices, incident reporting rules, and clearer lines for who is responsible when things go wrong. Plans For Legal Change And A Timeline The FSA plans to compile a full report of the discussions and push for changes to the Financial Instruments and Exchange Act at the 2026 ordinary Diet session. That timetable gives legislators time to consider the details and for industry groups to weigh in. Some in the market warn the new rules could mean extra compliance work for smaller vendors. Others say that may be a fair trade for stronger protections for customers. Stablecoins And Pilot Projects Based on reports, the FSA is not only focused on custody. The agency has also signaled interest in nurturing regulated stablecoin work inside Japan. In October 2025, the FSA approved JPYC, the country’s first yen-pegged stablecoin, which launched shortly after. The regulator has also supported a pilot stablecoin effort involving major banks MUFG, SMBC, and Mizuho Bank. The DMM Crypto Incident That Changed Views The push for change gained speed after a major hack in 2024. Reports have disclosed that hackers stole over 48 billion yen — roughly $311 million — in Bitcoin from DMM Bitcoin. Investigators later traced the breach to Ginco, a Tokyo-based firm that managed parts of DMM’s trading system. That case made it plain to many officials that outsourcing critical operations can spread risk beyond the exchange itself. Featured image from Unsplash, chart from TradingView