Japan’s 2026 Crypto Crackdown: Mandatory Custody Registration Rules Tighten Security

Japan doubles down on crypto oversight—new custody registration requirements kick in by 2026, forcing exchanges to lock down assets or face the music.

No more cowboy custody: The Financial Services Agency (FSA) slams the gavel on lax security practices, demanding full compliance within 18 months.

While traders groan about red tape, regulators smirk—another 'protective' move that conveniently funnels power (and fees) back to the old guard. Classic finance playbook.

Japan is preparing a new rule that could significantly change how crypto assets are stored and handled in the country. The Financial Services Agency (FSA) wants any company holding or managing crypto for exchanges to be officially registered with the government. This means every custody or trading-management provider must prove it is secure and compliant before touching user assets.

Why Japan Is Doing This

Crypto exchanges in Japan already have strict rules. They must protect user funds, store most assets in cold wallets, and maintain clear internal controls. But there is a loophole: these rules don’t apply to outside companies that exchanges hire for custody or trading support.

That gap turned into a real problem in 2024. DMM Bitcoin, one of Japan’s major exchanges, was hacked, losing ¥48.2 billion (about $312 million) worth of bitcoin. The hack didn’t happen inside the exchange itself. It originated through a third-party software firm, Ginco, which handled part of the exchange’s trading operations. The incident exposed a major weakness: even if exchanges are secure, an unregulated outside partner can put user funds at risk.

• Also Read :
•   Japan’s FSA To Tighten Crypto Lending Rules, Proposes Limits For IEOs
•   ,

What the New Rule Would Do

Under the plan, companies providing crypto custody or trading services must register with authorities before operating. Exchanges will only be allowed to use custodians that appear on the government’s approved list. In short, if a provider is touching user assets in any way, it must meet the same security standards as the exchange itself.

Members of Japan’s Financial System Council, which advises the Prime Minister, discussed the proposal on November 7. According to reports from Nikkei, most members supported the change. The FSA plans to turn these discussions into a formal proposal and aims to submit amendments to existing financial laws during the 2026 parliamentary session.

What It Means for Crypto Users

The rule comes at the same time Japan is actively pushing forward new crypto and blockchain initiatives. The FSA recently approved Japan’s first yen-backed stablecoin, JPYC, and is supporting a stablecoin pilot involving Japan’s three major banks, Mizuho, MUFG, and SMBC. These projects show that Japan wants to lead in digital finance, but without compromising safety. For everyday crypto holders, this move means more protection. Exchanges won’t be able to outsource critical operations to unknown or poorly secured companies. Everything touching user assets WOULD require government oversight and registration.

Stay ahead with breaking news, expert analysis, and real-time updates on the latest trends in Bitcoin, altcoins, DeFi, NFTs, and more.

FAQs

Japan requires all companies managing crypto for exchanges to register with the government, ensuring security and compliance.

A 2024 hack exposed risks from unregulated third-party firms, prompting stricter oversight to protect user funds.

Exchanges can only use registered custodians, ensuring all partners meet the same security standards as the exchange itself.

Yes, it prevents exchanges from outsourcing key operations to unverified companies, adding a LAYER of government oversight.

The FSA plans to submit legal amendments in 2026, with registration requirements likely enforced after parliamentary approval.