Japan FSA Completes Review of 32 Crypto Exchanges, Signals Potential Resumption of Licensing

·

The Japanese Financial Services Agency (FSA) has completed on-site inspections of 23 cryptocurrency exchanges, marking a pivotal step toward resuming the licensing process for new market entrants. This development follows a prolonged regulatory pause triggered by the 2018 CoinCheck hack, which led to heightened scrutiny across the country’s digital asset sector. With over 100 companies currently awaiting approval—including major banks, IT firms, and securities institutions—the FSA’s renewed evaluation process could reshape Japan’s crypto landscape in 2025 and beyond.

Regulatory Crackdown and Industry Impact

Since the $530 million CoinCheck breach in January 2018, the FSA has suspended new exchange approvals while conducting comprehensive reviews of existing and pending operators. The recent inspections targeted 23 platforms, only seven of which currently hold full licenses under Japan’s Payment Services Act. The remaining 16 operate as registered "crypto asset trading service providers" or “dealers,” permitted to function during the application review period but under strict oversight.

👉 Discover how global regulators are shaping the future of crypto compliance.

The findings revealed systemic vulnerabilities across the sector:

According to a provisional report released by the FSA, some exchanges manage up to ¥33 billion (approximately $300 million USD) per employee, with total industry assets having increased sixfold within just one year. These structural imbalances have raised serious concerns about operational resilience and investor protection.

Core Challenges Facing Japanese Crypto Exchanges

1. Internal Control Deficiencies

Many exchanges lack robust governance frameworks. As trading volumes surged, internal systems failed to evolve at the same pace. This mismatch has left platforms vulnerable to technical failures, security breaches, and insider manipulation.

2. Risk Management Gaps

The FSA noted that several exchanges do not conduct comprehensive risk evaluations for each digital asset they list. Without proper due diligence, platforms expose users to highly speculative or potentially fraudulent tokens.

3. Understaffed Compliance Teams

Effective AML and Know Your Customer (KYC) protocols require dedicated personnel. However, numerous exchanges operate with fewer than 20 employees—far below what is needed to ensure regulatory adherence and real-time monitoring.

These findings underscore the FSA’s intent to strengthen licensing standards moving forward. Future applicants will likely face more rigorous assessments of their business models, cybersecurity infrastructure, and organizational capacity.

Path Forward: Stricter Approvals on the Horizon

While the FSA has not approved any new exchange licenses since the CoinCheck incident, reports indicate that reviews are now restarting. According to Nikkei, three applications are currently under active evaluation—one of which belongs to CoinCheck itself, following its acquisition by Monex Group.

The resumption of approvals suggests a shift from crisis response to structured regulation. The FSA plans to incorporate inspection insights into its decision-making framework, focusing on:

This enhanced scrutiny aims to balance innovation with stability, ensuring that only well-capitalized, professionally managed platforms enter the market.

👉 Learn how top-tier security practices are setting new standards in crypto trading.

Market Implications and Industry Outlook

With more than 100 firms awaiting approval, the restart of the licensing pipeline could significantly expand Japan’s regulated crypto ecosystem. Notably, applicants include established financial institutions seeking to integrate digital assets into mainstream services. Their involvement may boost public trust and drive wider adoption.

Moreover, the FSA’s methodical approach aligns with global trends toward clearer crypto regulations. By prioritizing transparency, accountability, and consumer protection, Japan continues to position itself as a leader in responsible fintech innovation.

Frequently Asked Questions (FAQ)

Q: How many cryptocurrency exchanges are currently licensed in Japan?
A: As of the latest FSA report, only seven cryptocurrency exchanges hold full licenses. The rest operate under provisional registration while undergoing review.

Q: Why did the FSA pause new exchange approvals?
A: The pause followed the 2018 CoinCheck hack, which compromised $530 million worth of NEM tokens. The incident exposed critical weaknesses in exchange security and risk management, prompting a nationwide regulatory review.

Q: What criteria will the FSA use for future licensing decisions?
A: The FSA will assess business plan sustainability, internal control systems, cybersecurity measures, staffing levels, and compliance capabilities—especially in AML and KYC procedures.

Q: Are foreign-based exchanges affected by these regulations?
A: Yes. Any platform serving Japanese customers must comply with FSA rules, regardless of its physical location. Non-compliant foreign exchanges have previously been issued cease-and-desist orders.

Q: When is the FSA expected to resume licensing?
A: While no official timeline has been announced, active reviews are already underway. Industry analysts expect approvals to resume gradually throughout 2025, starting with high-compliance applicants like CoinCheck.

Q: How does Japan’s regulatory approach compare globally?
A: Japan is among the most advanced jurisdictions in crypto regulation. Its early adoption of licensing frameworks contrasts with slower-moving markets like the U.S., making it a model for balanced oversight.

Conclusion: Building a Safer Crypto Ecosystem

The FSA’s completion of inspections signals a turning point for Japan’s digital asset industry. By addressing systemic flaws identified during audits, regulators are laying the groundwork for a safer, more transparent market. While stricter requirements may delay some approvals, they ultimately enhance investor confidence and long-term sector stability.

As global interest in cryptocurrencies grows, Japan’s disciplined regulatory model offers valuable lessons for other nations navigating this complex space. For aspiring exchange operators, success will depend not just on technology—but on organizational maturity, risk discipline, and unwavering commitment to compliance.

👉 See how next-generation trading platforms are meeting evolving regulatory standards worldwide.

Core Keywords: