Major Boost for the Crypto World? Japan Considers Allowing Banks to Hold and Trade Bitcoin

According to reports, Japan's Financial Services Agency (FSA) is considering reforms that would allow domestic banks to purchase and hold digital assets, including Bitcoin, for investment purposes.

This move would represent a significant departure from the conservative stance established by Japanese regulators in 2020 – when authorities prohibited local banks from holding cryptocurrencies due to concerns about volatility and financial stability.

Under the proposed framework, banks would be able to buy and sell digital assets much like stocks and government bonds, with specific safeguards in place to ensure their financial soundness. The FSA plans to establish risk management protocols to mitigate the potential impact of sharp price fluctuations on bank balance sheets.

As early as 2020, Japan implemented strict cryptocurrency regulations by revising the Payment Services Act and the Financial Instruments and Exchange Act. These laws established a comprehensive regulatory framework covering crypto asset service providers, custody businesses, and derivatives trading.

This reform proposal comes as Japan faces severe economic challenges – with its debt-to-GDP ratio reaching approximately 240%, the highest in the world. This has prompted Japanese policymakers to explore tools to address financial pressures, including low-interest-rate policies and targeted regulation.

In this context, digital assets could provide investors with alternative yield channels outside the traditional financial system, thereby motivating the Japanese government to promote their adoption.

In recent years, Japan's cryptocurrency market has experienced rapid growth. As of February 2025, the number of registered cryptocurrency accounts in Japan has exceeded 12 million, an increase of approximately 3.5 times compared to five years ago.

Major Japanese banks have explicitly expressed interest in expanding cryptocurrency services. Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, and Mizuho Bank have jointly issued stablecoins pegged to both the Japanese Yen and the US Dollar.