Market News

Japan Strengthens Crypto Regulations to Safeguard Investors

On June 6, Japan’s parliament officially updated the Payment Services Act (PSA) to enhance protections for local crypto investors.

This revision addresses the increasing bankruptcy risks associated with foreign crypto exchanges, which have left Japanese investors vulnerable.

The law was influenced by a hacking incident in 2024 that resulted in over $305 million in Bitcoin outflows, emphasizing the necessity for more stringent security measures.

Key changes include a requirement for crypto exchanges to hold investor assets domestically, aiming to shield them from foreign exchange failures.

Additionally, a new intermediary framework will facilitate cooperation between crypto exchanges and users, enhancing in-app cryptocurrency functionalities.

The updates also allow stablecoin issuers to allocate up to 50% of their issuance to low-risk assets, fostering innovation while prioritizing safety.

Furthermore, all crypto-related businesses are now subject to strict registration and compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) regulations.

The revised law has been approved by both houses of parliament and will be implemented within the next year.

Japan's proactive stance reflects a commitment to protecting domestic investors while encouraging the growth of a secure crypto landscape.

By balancing regulation and innovation, Japan aims to establish a robust and trustworthy environment for cryptocurrency transactions.