Quick Answer
Yes, cryptocurrency is legal and regulated in Japan.
- It is regulated under the Payment Services Act (PSA).
- Exchanges must register with the Financial Services Agency (FSA).
Legal Status of Crypto in Japan
Cryptocurrency is unequivocally legal in Japan, operating within a well-defined and robust regulatory framework designed to protect consumers and foster innovation. This legal clarity is primarily established by the Payment Services Act (PSA), which requires crypto-asset exchange providers to register with the main regulatory authority, the Financial Services Agency (FSA). Other regulations, such as the Financial Instruments and Exchange Act (FIEA) and rules from self-regulatory organizations, impose further compliance requirements related to anti-money laundering and user protection, solidifying crypto's legitimate status in the country.
Current Regulations
Japan's cryptocurrency landscape is primarily governed by two key statutes: the Payment Services Act (PSA) and the Financial Instruments and Exchange Act (FIEA). The PSA defines most digital currencies as "Crypto Assets" and mandates that any business providing exchange services must register with the Financial Services Agency (FSA). This framework also imposes strict consumer protection rules, including the segregation of customer funds and a requirement to keep at least 95% of user assets in offline cold wallets. Meanwhile, tokens with investment-like features, such as security tokens, fall under the more stringent regulations of the FIEA.
Regulatory Authorities
Several key regulatory bodies work in concert to oversee and enforce Japan's comprehensive crypto regulations.
- Financial Services Agency (FSA): As the primary regulator, the FSA is responsible for registering and supervising crypto-asset exchange providers, developing the legal framework, and enforcing anti-money laundering rules. It also issues supervisory guidelines to ensure consumer protection and market stability.
- Japan Virtual and Crypto Assets Exchange Association (JVCEA): This self-regulatory organization (SRO) sets rules for its member exchanges, such as pre-approving new crypto assets before they are listed. The JVCEA acts as a bridge between the industry and government regulators to help enforce compliance.
- National Tax Agency (NTA): The NTA is responsible for the tax treatment of digital assets, classifying crypto gains as "miscellaneous income" for individuals. It enforces tax compliance and cooperates with exchanges to track transactions and prevent evasion.
- Japan Security Token Offering Association (JSTOA): As another authorized SRO, the JSTOA specifically oversees businesses that raise capital through security token offerings (STOs). It ensures these offerings comply with the regulations set forth in the Financial Instruments and Exchange Act.
- Ministry of Finance: This ministry enforces the Foreign Exchange and Foreign Trade Act, which includes oversight of cross-border transactions. It requires residents to report large crypto asset payments or receipts that exceed certain thresholds.
Historical Context
Japan's regulatory journey began in 2017 with the Payment Services Act (PSA), which established a legal framework but offered minimal user protection. A major policy shift occurred after several high-profile exchange hacks, prompting regulators to enforce a much stricter regime focused on consumer safety and anti-money laundering. By 2022, the government began promoting Web3 as a national strategy and introduced new rules for stablecoins. More recently, tax reforms have eased burdens on corporations holding crypto. Looking ahead, Japan plans to reclassify crypto as financial products by 2026, a move that would introduce insider trading rules and could pave the way for crypto ETFs.
Compliance Requirements for Businesses in Japan
Businesses in Japan must navigate a comprehensive compliance landscape overseen by the Financial Services Agency (FSA). The government provides extensive guidance covering anti-money laundering (AML), customer verification, and operational integrity. Key requirements include:
- AML and KYC Procedures: The cornerstone of Japan's financial regulation is the Guidelines for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT). These rules mandate strict Know Your Customer (KYC) and Customer Due Diligence (CDD) processes, which involve verifying customer identities, understanding the nature of business relationships, monitoring transactions, and reporting suspicious activity. For crypto businesses, this also includes implementing the travel rule, which requires sharing sender and recipient information during transfers.
- Sector-Specific Supervision: The FSA issues detailed "Comprehensive Guidelines for Supervision" for various financial sectors, including banks, insurance firms, and crypto-asset service providers. These documents outline mandatory procedures for risk management, establishing robust internal controls, customer protection, and transparent reporting.
- Data Protection and Disclosure: Firms are required to follow strict guidelines on protecting personal information within the finance sector. Additionally, there are specific rules governing corporate disclosure and transparency to ensure market fairness and integrity.
Why this matters for Cross-Border Payments
Japan's stringent regulations, particularly its enforcement of the travel rule and robust KYC protocols, create significant considerations for cross-border payments involving nations with different regulatory approaches, such as India. For businesses facilitating transactions between the two countries, this means navigating a complex compliance web that can introduce delays and increase operational costs. The core pain point arises from the potential mismatch in data-sharing capabilities and legal standards, turning what should be a seamless digital transfer into a process fraught with friction and regulatory risk.
How Lightspark Enables Compliant Crypto-Native Payments
Lightspark provides an infrastructure for real-time, global payments through two core products. Lightspark Connect enables businesses to natively access the Bitcoin Lightning Network, abstracting away complexities like node management and liquidity. For fiat-to-fiat transactions, Grid Switch uses domestic real-time payment rails, leveraging Bitcoin as a neutral settlement asset for instant cross-border transfers. Both are powered by AI-driven routing and developer-first APIs to simplify integration and optimize for speed and cost.
These features directly address the friction in cross-border payments. For regulated institutions facing complex rules like Japan's travel rule, Lightspark offers tools that facilitate compliance. Features such as flexible custody options, audit-ready reporting, and built-in screening integrations help businesses use this modern payment infrastructure while adhering to their own stringent security and regulatory obligations, turning a potential compliance headache into a streamlined process.
To learn more about Lightspark's solutions for instant, global payments, visit their website.
Notice: This article is provided for informational purposes only and does not constitute legal advice.
FAQs
How is cryptocurrency taxed for individuals in Japan?
In Japan, profits from cryptocurrency are typically classified as "miscellaneous income" and are taxed at progressive rates that can reach up to 55%. This tax applies to gains realized from selling, spending, or exchanging crypto assets for other currencies.
Is it legal to mine cryptocurrency in Japan?
Cryptocurrency mining is considered legal in Japan and does not require specific registration like crypto exchanges. Miners must still adhere to general business laws, including tax obligations on their income and regulations concerning energy usage.
Are NFTs regulated like other crypto assets in Japan?
The regulation of NFTs in Japan is determined by their function, as there is no single law specifically governing them. An NFT could be subject to the Payment Services Act or the Financial Instruments and Exchange Act if it possesses qualities of a payment method or a security.
Sources
- Financial Services Agency, The Japanese Government. "Laws & Regulations." Financial Services Agency, n.d., www.fsa.go.jp/en/laws_regulations/index.html.
- Freeman Law. "Japan - Cryptocurrency Laws and Regulation." Freeman Law, n.d., freemanlaw.com/cryptocurrency/japan/.
- "Japan’s FSA proposes new framework for regulating crypto assets in Japan." Digital Watch Observatory, 11 Apr. 2025, dig.watch/updates/japans-fsa-proposes-new-framework-for-regulating-crypto-assets-in-japan.
- Lian, Anndy. "Analysis: Japan Will Reclassify Crypto as Financial Products—What It Means for Investors." Finance Magnates, 1 Apr. 2025, www.financemagnates.com/cryptocurrency/analysis-japan-will-reclassify-crypto-as-financial-products-what-it-means-for-investors/.
- McClure, Zac. "Guide to Crypto Taxes in Japan for 2025." TokenTax, 28 July 2025, tokentax.co/blog/crypto-taxes-in-japan.
- Nagase, Takeshi, et al. "Blockchain & Cryptocurrency Laws and Regulations 2025 – Japan." Global Legal Insights, 25 Oct. 2024, www.globallegalinsights.com/practice-areas/blockchain-cryptocurrency-laws-and-regulations/japan/.
- Takenaka, Kiyoshi. "Japan to give crypto assets legal status as financial products, Nikkei says." Reuters, 30 Mar. 2025, www.reuters.com/technology/japan-give-crypto-assets-legal-status-financial-products-nikkei-says-2025-03-30/.
