2024

Prime

would

Japan’s Financial Services Agency (FSA) is reportedly preparing to introduce a new regulatory framework aimed at tightening oversight of third-party companies that provide custody and trading management systems for cryptocurrency exchanges.
According to a report by <a href="https://www.nikkei.com/article/DGXZQOUB052RR0V01C25A1000000/" target="_blank" rel="noopener noreferrer nofollow">Nikkei</a>, the FSA’s proposal was discussed on November 7 during a meeting of the Financial System Council, an advisory body to the Japanese Prime Minister.&nbsp;
The plan seeks to require digital asset custody and trading service providers to register with authorities before offering their services to licensed crypto exchanges.
Currently, Japan’s crypto exchanges are obligated to maintain strict management of customer deposits, such as holding client assets in cold wallets disconnected from the internet.&nbsp;
However, the same standards have not applied to the external firms providing transaction and asset management systems to those exchanges, a regulatory gap that the <a href="https://hash.media/hashdesk/fsa-approves-pilot-for-joint-yen-backed-stablecoin-in-japan/" target="_blank" rel="noopener noreferrer nofollow">FSA</a> now aims to close.
The push for tighter rules follows a major security breach in 2024 at DMM Bitcoin, one of Japan’s largest crypto exchanges, which lost around 48.2 billion yen ($312 million) worth of Bitcoin in a hacking incident.&nbsp;
Investigations revealed that the attackers infiltrated the system through Ginco, a Tokyo-based software firm that handled DMM’s transaction management. The case exposed significant vulnerabilities in outsourced digital asset infrastructure and prompted widespread calls for reform.
Under the proposed system, only service providers that have been registered and approved by the FSA would be permitted to work with licensed exchanges. The agency believes this would enhance accountability and reduce risks associated with outsourcing critical security functions.
Several members of the Financial System Council reportedly supported the move, emphasizing the need for clearer responsibilities between exchanges and external providers.&nbsp;
The FSA is expected to finalize its recommendations and prepare a bill to amend the Financial Instruments and Exchange Act, likely to be submitted to Japan’s 2026 ordinary Diet session.
If implemented, the new framework could mark a major step in Japan’s ongoing efforts to strengthen investor protection and reinforce trust in its digital asset ecosystem.
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FSA to tighten oversight on Japan’s Crypto service firms

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