Japan Eyes Letting Banks Hold And Trade Bitcoin As Crypto Adoption Grows

Core Viewpoint - Japan's Financial Services Agency (FSA) is considering reforms to allow domestic banks to acquire and hold digital assets, including Bitcoin, for investment purposes, marking a significant shift from its conservative stance established in 2020 [1][3] Group 1: Proposed Reforms - The proposed framework would enable banks to trade digital assets similarly to stocks and government bonds, with safeguards to ensure financial soundness [3] - The FSA plans to develop risk management protocols to mitigate the impact of sudden price swings on banks' balance sheets [3][7] - Discussions on these reforms are expected to take place at a working group meeting of the Financial System Council [4] Group 2: Regulatory Context - Japan previously enforced strict crypto regulations through amendments to the Payment Services Act and the Financial Instruments and Exchange Act in 2020, establishing a comprehensive framework for crypto asset service providers [5] - Officials are exploring mechanisms for banking groups to register as licensed cryptocurrency exchange operators [5] Group 3: Economic Context - Japan faces significant economic challenges, with a debt-to-GDP ratio of approximately 240%, prompting policymakers to seek alternative financial tools [7] - Digital assets may provide investors with alternative avenues for returns outside traditional financial systems, potentially increasing adoption [7] Group 4: Market Growth - Japan's crypto market has seen rapid growth, with over 12 million cryptocurrency accounts registered as of February 2025, a 3.5-fold increase from five years prior [8] - Major Japanese banks, including Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corp., and Mizuho Bank, have shown interest in expanding crypto services, including issuing stablecoins pegged to the Japanese yen and the U.S. dollar [8] Group 5: Case Study - Metaplanet serves as an example of Japan's booming crypto market, having acquired and held Bitcoin as a treasury reserve while launching Bitcoin-backed financial products to generate income in a low-yield market [9] - The company raises capital through equity and preferred shares to fund its Bitcoin purchases [9]