The Financial Services Agency (FSA) of Japan is poised for a major policy shift. They are reviewing rules that could allow banks to purchase and hold cryptocurrencies like Bitcoin. If approved, this would be a significant step forward for Japan’s banking system, potentially bringing traditional financial institutions into the world of cryptocurrency. 2020 regulations had previously restricted banks from holding digital assets due to volatility and risk concerns. Now, in 2025, the FSA believes the market has matured enough for this re-evaluation. The agency plans to submit their proposal to the Financial Services Council for review, which advises the Prime Minister. They intend to study how crypto can be categorized alongside traditional investments like government bonds and company shares. This move signals Japan’s growing intention to integrate digital assets as a core part of its economy, moving beyond them as simply risky side projects. 2025 saw an impressive surge in registered crypto users, with over 12 million accounts recorded by February. These statistics have prompted the FSA to update outdated regulations and adapt to current financial realities. The agency seeks to develop clear rules for managing risks associated with crypto that could impact banks’ finances. Before allowing banks to hold or trade digital assets, a rigorous capital and risk-control system will need to be implemented. Regulations may also allow bank groups to apply for licenses to operate crypto exchanges, enabling them to offer trading and storage services directly to customers. At the same time, tighter controls are being put into place. The Securities and Exchange Surveillance Commission is working on new rules to combat insider trading in cryptocurrency. These efforts signify a strong commitment by Japan to building a fair and trustworthy digital asset market. Japan’s crypto market has witnessed substantial growth recently. By February 2025, over 12 million registered crypto accounts were recorded. This figure represents a three-fold increase compared to five years ago. The FSA’s efforts are driving this adoption and prompting the agency to update outdated regulations. In September, the agency proposed shifting crypto regulation under the Financial Instruments and Exchange Act (FIEA), instead of the Payment Services Act, for greater clarity and investor protection. Major banks in Japan, including Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corp. (SMBC), and Mizuho Bank, have joined forces to launch a yen-backed stablecoin, aiming to make business payments smoother and cheaper. The collaboration demonstrates the willingness of major banks to utilize blockchain technology for enhancements in their core services. This partnership could be further supported by the FSA’s planned reforms. The regulatory landscape is likely to change significantly as Japan moves towards allowing its banks into the world of cryptocurrency.