Will Japanese Banks Start Investing in Bitcoin Soon?

Over recent years, the world has witnessed a steady shift of digital assets from the fringes toward mainstream finance. 

Now, in Japan, the national regulator, the Financial Services Agency (FSA), is reportedly weighing reforms that could allow Japanese banks to hold and invest in Bitcoin and other cryptocurrencies.

In this article, we explore why this shift is happening, what it could mean for Japanese banks and the broader crypto-market, and what obstacles remain.

Japan Bank Crypto Adoption

Japan has seen surging crypto adoption, with more than 12 million crypto accounts as of early 2025, roughly 3.5 × the number five years prior.

In response, the FSA appears motivated to bring banks into the digital-asset ecosystem via three main angles:

• Institutionalisation pressure: Banks globally are increasing crypto exposure (via ETFs or treasury holdings), and Japan doesn’t want to lag.
  
   
• Regulatory alignment: The FSA aims to reclassify crypto assets under the Financial Instruments and Exchange Act (FIEA), treating them like securities/investments rather than purely payments.
  
   
• Economic innovation & competitiveness: By enabling banks to engage with crypto, Japan bolsters its fintech/crypto profile, increases options for institutional investors, and potentially accelerates broader blockchain adoption.

Read Also: Can Commercial Banks Adopt Crypto? Here is the Full Take

What Would Banks Be Allowed to Do?

Under the current 2020 guidelines, Japanese banks are effectively restricted from investing in crypto assets because of concerns over volatility and impact on financial stability.

The proposed reforms would permit banks to:

• Acquire and hold Bitcoin and other crypto assets for investment purposes, similar to how they treat government bonds or equities.
  
   
• Possibly register as crypto-asset exchange operators (bank groups operating crypto exchanges/custody).
  
   
• Operate under risk-management frameworks: banks would have to meet capital requirements, risk limits, and possibly separate crypto holdings from core banking assets to protect depositors.

 As for timing, the FSA working group and the advisory body (the Financial Services Council) will review the reforms. No firm implementation date yet, though media suggest discussions are underway in 2025.

Read Also: Japan’s Crypto Insider Ban: Nikkei Insights on FSA Rules

Implications for banks, investors, and crypto markets

For Japanese banks

• New asset class: Banks could diversify into crypto, offering new investment products or Treasury-level exposure.
  
   
• Revenue opportunities: Custody, trading services, and crypto-exchange operations could be opened up, creating fee income.
  
   
• Risk exposure: Volatility remains a key concern, losses from crypto holdings could impact bank stability. The regulatory proposal looks to address this via safeguards.

For investors (institutional & retail)

• Increased legitimacy: If banks embrace crypto, it signals a maturation of the asset class in Japan.
  
   
• Better infrastructure: Bank-backed custody and trading services might reduce counterparty risk compared to smaller exchanges.
  
   
• Access and products: Institutional investors may get broader access (via banks) to crypto-investments through regulated frameworks.

For the crypto market in Japan & globally

• Mainstream adoption: Japan’s move could encourage other jurisdictions to follow suit, accelerating global institutional adoption of Bitcoin.
  
   
• Regulatory model: Japan’s approach of aligning crypto with existing investment-asset regulation (e.g., FIEA) may become a model.
  
   
• Market size expansion: With banks participating, the capital entering crypto markets could increase, possibly affecting liquidity and valuations.

Wider strategic significance

• With more than 12 million crypto accounts in Japan, and regulatory changes like a flat 20 % capital-gains tax and reclassification of tokens, the ecosystem is gearing toward institutional participation.
  
   
• Japan also leads Asia in crypto-growth (120 % increase in 2025 per one report), which adds impetus to banking reform.

Read Also: Japan’s Crypto Reform: Flat Tax, ETFs, and a New Investment Era

Key hurdles and risks to watch

• Volatility & bank-balance risks: Crypto assets like Bitcoin remain highly volatile, and losses could impact banking books unless well-segmented and risk-controlled.
  
   
• Regulatory clarity & implementation: Even if reforms are approved, banks will need detailed rules on custody, asset classification, capital charges, risk-management, delays, or ambiguity could slow rollout.
  
   
• Internal culture & systems: Banks used to traditional assets may need new infrastructure and expertise (crypto custody, wallets, blockchain risk), not trivial.
  
   
• Tax and legal environment: Japan is still adjusting its crypto tax and legal frameworks; unresolved issues could hamper adoption.
  
   
• Reputational risk: Crypto exchanges have had scandals globally, and banks entering the space must manage operational, compliance and AML risks carefully.
  
   
• Macro/regulatory backlash: If a bank experiences losses tied to crypto exposure, regulators may tighten rather than loosen frameworks. Prudent phased rollout is likely.

Read Also: Japan Embraces Crypto in Corporate Culture: Leads the Crypto Race?

What to Expect Next

Based on current reporting, it appears quite likely that Japanese banks will eventually be allowed to invest in Bitcoin and other cryptocurrencies, though not immediately, and under strict conditions. 

The key elements, reform proposals by the FSA, significant crypto-account base in Japan, and clear institutional incentives, all point toward that outcome.

Expect a phased approach: first, clearer rules, then pilot banks, then wider roll-out. Investors and banks should monitor:

• Final legislative text and effective date
  
   
• The scope of assets banks may hold (just Bitcoin? Or broader crypto-asset types?)
  
   
• Risk frameworks and capital requirements for banks’ crypto holdings
  
   
• How banks integrate custody/trading services for retail or institutional clients
  From a strategic perspective, Japan's positioning of banks to engage with crypto would mark a major milestone in the bridging of traditional and digital finance.

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FAQ

What does this regulatory change mean for Japanese banks?

It means banks may be able to hold Bitcoin and other crypto-assets like stocks or bonds, offer crypto trading/custody services, and thus open up new business lines, subject to risk controls and regulatory safeguards.

When might Japanese banks start investing in Bitcoin?

While no exact date has been published, the FSA’s working group is already reviewing proposals in 2025. A reasonable expectation is that pilot frameworks could emerge within the next 12-24 months, depending on legislative progress.

Will this move increase the price of Bitcoin?

Potentially yes, if banks allocate meaningful capital to Bitcoin, it could increase demand and boost market sentiment. However, price movement will also depend on global factors, regulations in other jurisdictions, and macroeconomic trends.

What risks do banks face when investing in Bitcoin?

The main risks include price volatility, liquidity shocks, custody failures, regulatory/AML issues, and possible reputational damage if the bank suffers losses or operational failures tied to crypto exposure.

How does Japan’s move compare globally?

Japan’s proposed reforms align with global trends where institutional and banking participation in crypto is increasing. However, Japan’s approach (reclassifying crypto as financial products, aligning with securities laws) is somewhat more structured and conservative compared to some other jurisdictions.