October 19, 2025 — Japan’s financial landscape appears to be on the cusp of a major shift. According to multiple reports, the Financial Services Agency (FSA) is actively reviewing proposals to grant banks the right to invest in and hold crypto-assets as part of their broader financial services offering.
If approved, this move would mark one of the most significant steps by a major economy to formally integrate digital assets into the institutional banking framework, opening the door for Japan’s banks to move beyond merely offering custody or tokenised services, and actually owning crypto-assets themselves.
What We Know So Far About Japan’s Moves
- The FSA is set to propose amendments to the Financial Instruments and Exchange Act (FIEA) and related legislation as early as 2026, with the aim of classifying crypto-assets as financial products. That includes applying insider-trading rules, reporting obligations and institutional investment frameworks.
- The endorsement from Japan’s finance minister, Katsunobu Kato, was clear: cryptocurrencies have a role as portfolio diversification assets, provided proper frameworks are in place.
- Japan already has a robust regulatory regime for crypto-asset service providers under the Payment Services Act (PSA), but banks have long been restricted from direct crypto investment. The planned change would dismantle a significant institutional barrier.
Why This Matters
1️⃣ Institutional Legitimacy for Crypto
When major banks gain permission to hold and invest in crypto-assets, rather than just offering ancillary services, it signals a major validation of digital assets as part of mainstream finance. Japan moving down this path could influence other jurisdictions watching closely.
2️⃣ Banks as Bridges Between Traditional Finance & Crypto
If banks adopt crypto-assets in their portfolios (alongside securities, real estate, bonds), it blends the old and new financial systems. For example, banks might offer crypto exposure via dashboards previously reserved for stock/bond portfolios.
3️⃣ Risk, Custody & Regulation Become Central
Investing in crypto opens banks up to volatility, custody risk, regulatory uncertainty and market infrastructure demands. For crypto platforms and ecosystem players, this means increased demand for institutional-grade custody, compliant trading infrastructure and transparent governance.
4️⃣ Competitive Advantage for Japan
With Singapore, Hong Kong and others racing to become Asia’s crypto hubs, Japan’s recalibration may help retain talent and capital. The regulatory clarity and involvement of banks can be a strong differentiator.
In a nutshell, Japan allowing banks to invest in crypto-assets is a noteworthy turning point. It reflects growing institutional trust, regulatory maturation and the bridging of traditional finance with the crypto economy. For crypto traders, platforms and service providers, this isn’t just policy change as it’s a signal of the next large-scale wave of institutional integration.
As Japan enters this phase, the question is no longer if banks will adopt crypto, but when and how.
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