Japan Passes New Crypto Regulation : Here’s What’s New

On June 6, Japan’s parliament officially revised the Payment Services Act (PSA), introducing a domestic asset holding order aimed at preventing crypto outflows and protecting Japanese investors from the risks of overseas crypto exchange collapses.

Why Did Japan Revise Its Payment Services Law?

The revision is a direct response to the rising bankruptcy risks among foreign crypto exchanges. When such platforms collapse, the crypto assets held by Japanese investors are often at risk of outflows or loss.

In 2024, a major crypto exchange in Japan was hacked, leading to a Bitcoin outflow worth over $305 million. The incident raised serious concerns about the security of customer funds and highlighted the need for stricter regulations.

Key Highlights of Japan’s Revised Crypto Law

• Stronger Investor Protection: The new law mandates that crypto exchanges operating in Japan must hold investor assets domestically, shielding them from foreign exchange bankruptcies.
  
• Flexible Business Model: A new intermediary framework will allow smoother collaboration between crypto exchanges and users, even for in-app crypto asset use in games.
  
• Trust-Type Stablecoins Update: Issuers can now manage up to 50% of their stablecoin issuance in low-risk assets, creating room for innovation while maintaining safety.
  
• Stringent Registration Requirements: All crypto-related entities must now register under the revised PSA, with strict AML and CFT compliance rules in place.
  

What’s Next?

The law passed both the Lower House in May and the Upper House on June 6. It will be enforced within a year. Japan is also introducing a new category for businesses that facilitate interaction between exchanges and users, encouraging innovation in crypto asset services while tightening oversight.

Final Thoughts

Japan’s proactive move shows a clear intent: protect domestic investors from foreign exchange failures, while fostering a safe and scalable crypto ecosystem. The revised Payment Services Act marks a significant step in balancing security, regulation, and innovation in Japan’s crypto space.