FSA on-chain finance and stablecoin rules explained

FSA policy priority for on-chain finance

The FSA’s 2026 policy priority clearly moves Japan beyond pilot-stage experimentation toward structured development for on-chain financial infrastructure. The designation covers four distinct areas: payments, securities settlement, tokenization, and cross-border transfers across the financial system. Payments fall under the Payment Services Act, while securities settlement touches the Financial Instruments and Exchange Act. The program-year structure is the administrative mechanism through which the FSA organizes its supervisory and policy development work. This designation is a formal commitment of agency resources and attention. The scope of the designation is broad enough to suggest the agency approaches on-chain finance as a horizontal policy question rather than a narrow technology adoption issue. MUFG, SMBC, Mizuho, and other major banks plan to launch a fiat-collateralized stablecoin within the 2026 fiscal year. These banks began joint pilot tests for stablecoin issuance in November 2025 and will establish a coordination body to study commercial applications. The FSA remains wary of allowing licensed deposit institutions to issue stablecoins on permissionless chains. It prefers permissioned chains and wants to impose the travel rule, which requires KYC for trust bank issued stablecoin transfers. Will the regulator issue a unified tokenization framework or instead proceed through separate guidance for each asset class?

Foreign stablecoin recognition and Sony Bank

The implementation of the June 1, 2026 rule for foreign stablecoins provides a clear pathway for overseas issuers to enter the Japanese market. This framework allows registered electronic payment service providers to handle stablecoins issued by overseas trust banks. To qualify, issuers must operate under foreign laws equivalent to Japanese regulations and maintain reserve assets that match the displayed monetary denomination. Issuers also must maintain systems to address criminal misuse and ensure supervisory authorities can share information with the FSA. Sony Bank’s subsidiary, Connectia Trust, obtained conditional US OCC approval to issue dollar-denominated stablecoins. Sony plans to start operations in 2027 using $40 million in initial capital. This $40 million commitment exceeds 10% of Sony Financial Group’s capital, which requires disclosure to Japanese authorities under the Financial Instruments and Exchange Act. Sony partnered with Bastion Platforms to manage issuance, custody, and transfer. You should note that Sony intends to use these tokens for treasury operations and cross-border payments, plus in-app purchases for video games, anime, movies, and music.

The FSA assesses each foreign stablecoin individually by examining liquidity, credit risk, redemption reliability, and audit quality.

Enforcement against unregistered exchanges

The FSA’s enforcement against unregistered exchanges remains a direct response to illegal crypto trading in Japan. The FSA issued warnings to Bybit Fintech Limited, KuCoin, MEXG Global, Bitget Limited, and Bitcastle LLC because these entities provided crypto trading services to Japanese users without completing mandatory registration with the agency or local financial bureaus. Unregistered platforms bypass regulatory supervision and risk mixing customer funds with operational assets. These users also lose legal protections provided under Japanese law, which leaves them vulnerable to losses during insolvency or security breaches. The US Commodity Futures Trading Commission (CFTC) proposed a federal framework for crypto exchanges offering leveraged or margined trading to retail customers on October 5, 2026. This proposal focuses on exchanges offering leveraged or margined transactions and does not establish regulation for ordinary spot crypto trading. The CFTC proposed two specific regulations: Regulation Crypto Asset Transactions and Regulation Crypto Asset Markets. The proposed rules aim to strengthen market integrity and customer protections through federal oversight and increased transparency. These regulations include requirements for anti-manipulation controls and proof-of-reserves.