Japan is planning to reinvent how traditional banks interact with digital assets. The country’s financial watchdog is mulling a decision to permit members of banking groups to launch crypto trading services. The move is predicted to reshape how Japan controls its restricted digital asset market.
This development comes at a time when the crypto market is dealing with high selling pressure. The cumulative market cap dipped by another 2% over the last 24 hours to hover around $3.70 trillion. Its 24-hour trading volume spiked by 31% to stand at $224 billion. This suggests that investors are moving their funds quickly amid high turbulence.
Japan plans to lift crypto ban for banks
According to reports, the Financial Services Agency (FSA) of Japan is also considering scrapping its longstanding ban that prevents banks from buying and holding crypto for investment purposes. If this is approved, the move would mark one of the most crucial policy overhauls in Japan since it legalized crypto exchanges in 2017.
It is expected that this step would bring mainstream banking muscle into a sector long dominated by fintechs and securities firms. Presently, subsidiaries of banking groups are barred from registering as digital asset service providers. It is done under the Banking Act. The FSA’s proposed revision would allow securities subsidiaries of these groups to handle crypto trading. It will give them a level playing field with rivals under securities companies such as SBI Holdings and Rakuten Securities.
A report mentioned that the regulator is expected to make its case during an upcoming meeting of the Financial Services Council. Discussions with an advisory body to the Prime Minister will center on establishing a framework that lets banks trade and hold digital assets in the same way they handle stocks or government bonds. However, it will enforce risk management and disclosure standards. The FSA is treading carefully as it plans to require bank-affiliated securities firms to clearly warn retail investors about the volatility of the crypto market.
It added that Bitcoin and other digital assets lack tangible backing, and large holdings could expose banks to balance-sheet stress if prices collapse. This is a concern that led the FSA to ban direct investment back in 2020. Japan remains on its stance, which is more pragmatic than restrictive. Major institutions like BlackRock and Fidelity are entering the crypto arena through Bitcoin ETFs, and Tokyo appears eager to keep pace. A supportive decision could also strengthen the position of Japan as a regional digital finance hub.
