Japan weighs letting banks hold crypto and run exchanges

Japan's financial regulator is preparing to review rules that could allow domestic banks to acquire and hold cryptocurrencies such as Bitcoin for investment and to operate licensed crypto exchanges, a potential policy shift that officials plan to discuss at an upcoming meeting of the Financial System Council, an advisory body to the prime minister. The move would rescind parts of supervisory guidance issued in 2020 that effectively barred banks from direct crypto exposure because of volatility and related risks.

The Financial Services Agency will consider a framework that treats crypto assets more like traditional financial instruments, such as stocks and bonds, while imposing safeguards to protect bank soundness and retail investors. Regulators are expected to explore capital and risk management requirements, exposure limits relative to banks' capital bases, and other measures to contain the impact of sharp price swings on lenders' balance sheets. If approved, bank groups would likely face strict conditions before being permitted to hold digital assets or offer custody and trading services directly.

The proposal comes as Japan's crypto market has grown rapidly. FSA data show...