Japan has long been a leader in IT and fintech, establishing itself as a global technology hub. The country's progressive stance on cryptocurrency activities and digital asset trading has attracted entrepreneurs worldwide. This article explores Japan's regulatory framework for crypto businesses, key legal requirements, and licensing procedures—essential reading for those planning to register a cryptocurrency exchange or obtain an ICO license in Japan.
Regulatory Landscape for Crypto Businesses in Japan
Japan was among the first nations to establish comprehensive regulations for cryptocurrency activities, ICOs, and STOs. Its advanced regulatory environment fosters innovation while ensuring investor protection.
Key milestones:
- 2017: Bitcoin and other digital currencies recognized as legal tender under the Payment Services Act (PSA)
- 2019: Amendments to the Financial Instruments and Exchange Act (FIEA) expanded oversight of security-like digital assets
The Financial Services Agency (FSA) holds primary regulatory authority over crypto exchanges. All operators must obtain FSA approval before launching services.
Key Industry Associations:
- Japan Virtual Currency Exchange Association (JVCEA): Certified self-regulatory body overseeing crypto exchanges under PSA
- Japan Securities Dealers Association: Oversees financial operators under FIEA
Legal Status of Cryptocurrencies in Japan
Cryptocurrencies are defined under PSA amendments as assets that:
- Function as payment for goods/services
- Are exchangeable for other currencies
- Transferable via computer networks
Exchange services include:
- Buying/selling crypto assets
- Intermediary services for such transactions
- Managing user funds/crypto assets
Regulatory Framework for Crypto Businesses
Custody Services
- Must be registered as crypto exchanges under PSA
New storage requirements:
- Client assets in segregated cold wallets
- Matching reserves if using non-cold storage
Key Compliance Requirements:
- Mandatory licensing for all exchanges
- Strict AML/KYC procedures under Act on Prevention of Transfer of Criminal Proceeds
- No anonymous transactions permitted
- Fiat-crypto conversions only through registered exchanges
Foreign Crypto Exchanges Operating in Japan
Foreign platforms must comply with:
- PSA and FIEA provisions
- Prohibition on soliciting unregistered services (PSA Article 63-22)
Note: Registration requirements depend on the specific nature of activities conducted within Japan.
Obtaining a Cryptocurrency License in Japan
Requirements for applicants:
- Physical office in Japan
- Local representative
- Dedicated compliance/audit staff
Minimum capital:
- ¥10,000,000 (~€75,000) base requirement
- Plus 0.7% of capital (minimum ¥150,000)
Taxation of Cryptocurrency Exchanges
Tax treatment mirrors traditional exchanges:
- Sales: Subject to consumption tax
- Trading profits: Classified as "miscellaneous income" (15-55% rate)
- Inheritance tax: May apply to crypto holdings
Future Outlook
Japan maintains its crypto-friendly stance while enhancing safeguards:
- JVCEA provides guidance for unlicensed exchanges
- Robust licensing requirements enable competition with global hubs (e.g., UK, Switzerland)
👉 Explore compliant crypto exchange solutions for the Japanese market.
FAQ Section
Q: How long does the FSA licensing process typically take?
A: The process usually takes 6-12 months, depending on application completeness and compliance documentation.
Q: Can foreign entities apply for a Japanese crypto exchange license?
A: Yes, but they must establish a local presence and meet all regulatory requirements.
Q: What are the capital requirements for crypto exchanges?
A: Minimum ¥10 million base capital plus 0.7% of total capital (minimum ¥150,000).
Q: Does Japan allow privacy coins?
A: No, exchanges cannot handle privacy-focused cryptocurrencies that enable anonymous transactions.
Q: Are STOs regulated differently than ICOs?
A: Yes, STOs fall under FIEA regulations as securities offerings, requiring additional compliance measures.
Q: What happens if an exchange violates PSA regulations?
A: Penalties range from fines to license revocation, and in severe cases, criminal prosecution.
👉 Learn more about Japan's crypto regulatory framework from industry experts.