International Blockchain and Digital Assets Review 2026/27

1. Overview

Japan was one of the first jurisdictions to establish a comprehensive legal framework for blockchain and digital assets. Following the collapse of a major crypto-asset exchange in Japan in 2014, a registration regime for crypto-asset exchange service providers was introduced under the Payment Services Act of Japan (the “PSA”) in 2017, mainly for AML and customer protection purposes.

After another major hacking incident in 2018, the framework was further strengthened, particularly through stricter custody requirements introduced in 2020, including the general requirement to hold customers’ crypto-assets in cold wallets. In the same year, Japan introduced a regulatory framework for security tokens under the Financial Instruments and Exchange Act of Japan (the “FIEA”).

The Libra project prompted global discussions on stablecoin regulation. Japan responded by introducing a dedicated stablecoin framework in 2023, not as part of crypto-asset regulation, but within the legal framework for funds transfer services.

As a result, Japan established core frameworks for the three main categories of blockchain-based digital assets—crypto-assets, stablecoins and security tokens—at an early stage. Subsequent reforms have focused on practical issues arising under these frameworks.

More recently, in April 2026, reflecting the increasing use of crypto-assets as investment instruments rather than means of payment, the Financial Services Agency of Japan (“JFSA”) submitted a bill to transfer the regulatory framework for crypto-assets from the PSA to the FIEA. Under the proposed legislation, crypto-assets would be regulated within the securities law framework from 2027 onward.

2. Crypto-assets regulations under the Payment Services Act.

(1) Definition of crypto-assets

In Japan, the PSA defines “crypto-assets” as the following two types of tokens:

(a)Type 1 crypto-assets:

• these have a proprietary value that:

(i) is available as a means to pay unspecified persons in exchange for the purchase or loan of goods or the receipt of services;

(ii) can be purchased from and sold to unspecified persons (limited to that recorded on an electronic device or other materials electronically and excluding Japanese or foreign currencies, Currency- Denominated Assets (e.g., digital money issued by banks or funds transfer service providers and fiat-pegged stablecoins), Electronic Settlement Instruments that do not fall under Currency-Denominated Assets (i.e., non fiat-pegged type stablecoins) or Electronically Recorded Transferable Securities Representation Rights (i.e., security tokens)); and

(iii) is transferrable through a computer network.

(b) Type 2 crypto-assets:

• these have a proprietary value that:

(i) is mutually exchangeable with a Type 1 Crypto-Asset against unspecified persons excluding Japanese or foreign currencies, Currency-Denominated Assets, Electronic Settlement Instruments (i.e., non-fiat type stablecoins) or Electronically Recorded Transferable Securities Representation Rights (i.e., security tokens); and

(ii) is transferrable through a computer network.

As discussed above, security tokens and stablecoins are excluded

from the definition of crypto-assets, and one of the distinctive features of Japan’s digital asset regulatory framework is that it clearly distinguishes between crypto-assets and stablecoins by regulating them under separate legal regimes. In practice, one of the key issues is whether an NFT falls within the scope of a crypto-asset. In 2023, the JFSA amended its guideline on crypto-assets to introduce criteria, which are useful in distinguishing between regulated crypto-assets and unregulated NFTs, to clarify whether digital tokens fall within the definition of crypto-assets under the PSA. According to such criteria, if (i) the issuers of the tokens clarify that the tokens are not intended to be used to pay unspecified persons for goods and services and (ii) the price of the token per minimum unit is high (e.g., JPY1,000 or more), or the volume of tokens is limited (e.g., 1,000,000 or less), such tokens generally would not fall within the definition of crypto-assets.

(2) Definition of Crypto-Asset Exchange Services

Under the PSA, a person who engages in Crypto-Asset Exchange Services is required to be registered as a Crypto-Asset Exchange Service Provider (“CAESP”). “Crypto-Asset Exchange Services” are defined under the PSA as any of the following activities conducted in the course of business:

(a) the sale or purchase of crypto-assets or the exchange of crypto-assets for other crypto-assets;

(b) intermediation, brokerage or delegation of the acts described in (a) above;

(c) management of users’ funds in conjunction with (a) or (b) above; or

(d) management of crypto-assets on behalf of any other person (except as specifically provided by other acts regarding the management in the course of business).

While the issuance of crypto-assets is not directly captured by the definition of “Crypto-Asset Exchange Services,” the Guidelines state that selling or exchanging newly issued crypto-assets as a course of business is regulated as Crypto-Asset Exchange Services

Only registered CAESPs may conduct transactions related to crypto-assets that fall under the above definition.

Registered CAESPs are subject to strict customer protection and AML/CFT requirements, including information provision, segregation and cold-wallet custody of customers’ crypto-assets, KYC, record-keeping, suspicious transaction reporting and the travel rule.

As of 30 April 2026, there are 27 companies registered as CAESP in Japan.

3. Stablecoin regulations under the Payment Services Act.

(1) Types of stablecoins

Japanese stablecoin framework, which was introduced in 2023, covers tokens that (i) are issued at a price linked to the value of fiat currency and (ii) promise redemption at par—these are regulated as digital-money type stablecoins. Other types of stablecoins, such as algorithmic stablecoins, are generally regulated as crypto-assets. However, the Japanese regulator has the authority to designate certain arrangements as digital-money type stablecoins if they become widely used as a means of payment. In such a case, the token would be regulated as a stablecoin under Japanese law.

In addition, the PSA defines stablecoins, which are generally permission-less type stablecoins, as “Electronic Payment Instruments” and, in practice, Electronic Payment Instruments under the PSA are categorized into three types: (i) Type 1 Electronic Payment Instruments¹Similar to Crypto-Assets, Type 2 Electronic Payment Instruments also exist under the regulatory framework. However, they are rarely issued in practice., (ii) Specified Trust Beneficiary Right (Type 3 Electronic Payment Instruments), and (iii) trust-type stablecoins issued in foreign jurisdictions and crypto-asset type stablecoins designated by the FSA (Type 4 Electronic Payment Instruments). However, no crypto-asset type stablecoins have been designated to date, and only Type 1 and Type 3 Electronic Payment Instruments are currently issued in Japan.

Under the Japanese stablecoin regime, the issuance and redemption of Electronic Payment Instruments is considered as funds transfer services and therefore the issuers of Electronic Payment Instruments are limited to those who can conduct funds transfer businesses. Theoretically, Type 1 Electronic Payment Instruments can be issued by banks and funds transfer service providers. However, according to the JFSA’s current interpretation, banks are not permitted to issue Type 1 Electronic Payment Instruments (i.e., permission-less type stablecoins), and this remains an issue to be addressed²On the other hand, banks can issue tokenized deposits as permissioned type stablecoins under the Banking Act.. Type 3 Electronic Payment Instruments, which are structured using beneficial interests in trusts, have attracted significant attention in Japan. They may be issued by trust banks and trust companies that have filed the required notification with the competent authorities. The applicable regulations require that at least 50% of the trust property be held in demand deposits, while the remaining portion may consist of eligible time deposits and government bonds, subject to an aggregate limit of 50% of the trust property.

In addition to Electronic Payment Instruments issued under Japanese laws, the Japanese regulatory framework also recognizes so-called Foreign Electronic Payment Instruments, which are issued under foreign laws and regulations. Under the PSA, certain Foreign Electronic Payment Instruments may be distributed in Japan, provided that they meet the prescribed regulatory requirements mentioned below.

(2) Definition of Electronic Payment Instrument Services

Under the PSA, a person who engages in Electronic Payment Instrument Services is required to be registered as an Electronic Payment Instrument Services Provider (“EPISP”). “Electronic Payment Instrument Services” are defined under the PSA as any of the following activities conducted in the course of business:

(a) the sale or purchase of Electronic Payment Instruments or the exchange of Electronic Payment Instruments for other Electronic Payment Instruments;

(b) intermediation, brokerage or delegation of the acts described in (i) above;

(c) management of Electronic Payment Instruments on behalf of any other person (excluding certain cases specified by Cabinet Office Ordinance).

Unlike Crypto-Asset Exchange Services, the statutory definition of Electronic Payment Instrument Services does not expressly include the management of users’ funds as a regulated activity. In practice, however, EPISPs may receive customers’ funds in connection with their business, provided that they comply with the customer fund protection requirements under the PSA, including the obligation to safeguard such funds through a trust arrangement.

EPISPs are subject to strict regulation from the viewpoint of customer protection and AML/CFT in a manner similar to that applicable to CAESPs.

As of 30 April 2026, there is one company registered as an EPISP in Japan.

Stablecoins issued by foreign issuers licensed by overseas authorities may also be circulated in Japan. In this case, the foreign issuer is not required to obtain a Japanese license on the condition that it does not engage in solicitation in Japan. Instead, the EPISP that distributes Foreign Electronic Payment Instruments bears substantial regulatory obligations. From a customer protection perspective, if the value of Foreign Electronic Payment Instruments held in custody declines, the EPISP may be required to repurchase them from customers. In addition, the EPISP must implement safeguarding measures to ensure that sufficient funds are available to meet such repurchase obligations. Under this regime, USDC and RLUSD have been handled by a registered EPISP in Japan.

4. Security token regulations under the Financial Instruments and Exchange Act

The treatment of Security Token Offerings (“STOs”), where issuers use blockchain technology to issue security tokens and raise funds, was clarified by the 2020 amendments to the FIEA.

The FIEA classifies securities into Paragraph 1 Securities (e.g., shares, corporate bonds, and investment trust interests) and Paragraph 2 Securities (e.g., trust beneficial interests and collective investment scheme interests) according to their level of transferability. Paragraph 1 Securities, which are regarded as having a higher degree of transferability, are subject to more stringent disclosure requirements and business regulations than Paragraph 2 Securities.

Security tokens are referred to under the FIEA as “Electronically Recorded Transferable Securities Representation Rights” and are broadly categorized into: (i) tokenized Paragraph 1 Securities; (ii) tokenized Paragraph 2 Securities, known as Electronically Recorded Transferable Rights; and (iii) Excluded Electronically Recorded Transferable Rights. While category (i) continues to be treated as Paragraph 1 Securities, category (ii) is also treated as Paragraph 1 Securities in light of the enhanced transferability resulting from tokenization. By contrast, category (iii) continues to be classified as Paragraph 2 Securities.

Accordingly, both Tokenized Securities Representing Paragraph 1 Securities and Electronically Recorded Transferable Rights are treated as Paragraph 1 Securities and are, in principle, subject to the issuance disclosure and continuous disclosure requirements under the FIEA. In addition, any person engaging in the handling of such tokens must obtain a Type I Financial Instruments Business registration, which is the most stringent category of financial instruments business registration under the FIEA.

By contrast, Excluded Electronically Recorded Transferable Rights continue to be treated as Paragraph 2 Securities and are, in principle, exempt from the issuance disclosure and continuous disclosure requirements. Furthermore, the business regulations applicable to their handling are less stringent, and a Type II Financial Instruments Business registration, rather than a Type I Financial Instruments Business registration, is generally sufficient.

In Japan, security tokens have been issued in a variety of forms, including tokenized corporate bonds, tokenized beneficial interests in beneficiary certificate-issuing trusts, and tokenized silent partnership (tokumei kumiai) interests. In practice, however, security token offerings have been used predominantly in the context of real estate STOs.

5. Recent developments of digital asset regulations

Japan had established core regulatory frameworks for crypto-assets, stablecoins and security tokens by 2023. Since then, the regime has continued to evolve in response to practical issues.

For example, under the previous framework, even a person acting solely as an intermediary for crypto-asset or stablecoin transactions was required to register as a CAESP or EPISP, both of which are subject to relatively stringent requirements. This was considered a barrier for ordinary business companies entering the digital asset market.

To address this issue, the PSA was amended in June 2026 to create new intermediary business categories. Under the amended regime, a person acting solely as an intermediary for crypto-asset or stablecoin transactions on behalf of a registered CAESP or EPISP may operate under a lighter licensing regime. Such intermediaries are not subject to capital requirements and are not directly subject to AML/CFT obligations, which remain imposed on the registered CAESP or EPISP. This new framework is expected to facilitate broader business participation in the digital asset sector.

6. The Shift of Crypto-Asset Regulation from the Payment Services Act to the Financial Instruments and Exchange Act

Japan initially regulated crypto-assets under the PSA on the premise that they functioned primarily as a means of payment. However, as crypto-assets have increasingly been used as investment products, the government began reviewing around 2025 whether the primary regulatory framework should be transferred to the FIEA.

In December 2025, the JFSA’s Working Group on the crypto-asset system recommended that crypto-assets be repositioned under the FIEA as a distinct category of financial instruments, while remaining separate from traditional securities. The proposal aims to strengthen investor protection by introducing a securities law-based framework, including enhanced disclosure obligations, business conduct regulations, and market abuse rules such as insider trading prohibitions, while maintaining the existing regulatory treatment of security tokens, stablecoins, and NFTs.

Based on these recommendations, the government submitted a bill to amend the FIEA in April 2026. The bill would retain the existing definition of crypto-assets while incorporating it into the FIEA. It would also impose disclosure obligations on issuers of crypto-assets and CAESPs, reclassify Crypto-Asset Exchange Services as a category of Financial Instruments Business, and bring crypto-asset-related investment management and investment advisory businesses within the regulatory scope. Borrowing of crypto-assets would also become subject to licensing regulation, and a new insider trading regime for crypto-assets would be introduced. The bill was passed in July 2026.

The planned transfer to the FIEA, expected to take effect in 2027, is likely to significantly affect the future development of Japan’s crypto-asset business. While the proposed framework would tighten regulation in certain respects, bringing crypto-assets within the FIEA framework may also facilitate the development of crypto-asset investment trusts and ETFs. According to the JFSA Working Group’s recommendations, depending on the final legislation and related reforms, banks and insurance companies may also become able to enter certain crypto-asset businesses through subsidiaries, an area historically subject to significant restrictions. Accordingly, developments in Japan’s digital asset market should be monitored from both regulatory tightening and regulatory relaxation perspectives.