PSA Registration Requirements for Crypto Exchanges in Japan 2025
Nov, 14 2025
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Why this matters: Under Japan's Payment Services Act, at least 95% of all customer crypto assets must be stored in offline cold wallets. This requirement was implemented after the 2018 Coincheck hack where $530 million was stolen. Failure to comply results in license revocation.
If you're thinking about running a cryptocurrency exchange in Japan, you need to know one thing upfront: PSA registration isn't just a formality. It's the only legal way to operate. The Financial Services Agency (FSA) doesn't allow unregistered platforms to touch Japanese customers' money or crypto. And if you try? You're looking at criminal penalties - up to three years in confinement, or fines of up to JPY 3 million. That’s not a warning. It’s the law.
What Exactly Is the Payment Services Act (PSA)?
The Payment Services Act (PSA) is Japan’s main law governing digital currency exchanges. Passed in 2017 and updated most recently in 2025, it defines what counts as a "crypto asset" - anything that isn’t tied to yen or any other fiat currency and can be used to pay people you don’t know. Bitcoin, Ethereum, Solana - those qualify. Prepaid cards backed by yen? Not crypto. Bank-issued digital coins? Not crypto either. Under Article 63-2 of the PSA, any business that buys or sells crypto assets as part of its operations must register as a Crypto Asset Exchange Service Provider (CAESP). This applies to everyone - local startups, foreign giants, even small teams. No exceptions. The FSA doesn’t care how big or small you are. If you’re trading crypto for money or other crypto with Japanese users, you need registration.Who Can Apply for PSA Registration?
You can’t just show up with a website and a business plan. The FSA only accepts applications from two types of entities:- Japanese stock companies (kabushiki-kaisha)
- Foreign companies that set up a Japanese subsidiary
Financial Requirements: It’s Not Cheap
The FSA doesn’t just want you to be legal - it wants you to be financially solid. Here’s what you need:- Minimum capital of JPY 10 million (about $65,000 USD)
- Positive net assets - you can’t be in debt when you apply
- Ongoing capital maintenance - you must keep this amount at all times
Compliance Systems: The Real Hurdle
Money isn’t the only barrier. The FSA demands you build full compliance infrastructure before you even submit your application. This includes:- Internal controls to prevent money laundering and fraud
- A dedicated compliance officer based in Japan
- Real-time transaction monitoring systems
- Employee training programs on AML/KYC rules
- Documentation of every step in your customer onboarding process
Customer Asset Protection: Cold Wallets Are Mandatory
One of the strictest rules in Japan is how you store users’ crypto. You can’t mix customer funds with your own. Not even a little.- At least 95% of all user crypto assets must be stored in offline cold wallets
- Remaining 5% can be in hot wallets for trading, but must be fully insured
- All user assets must be separately accounted for - no commingling allowed
Advertising and Marketing: No Hype, No Promises
You can’t say "get rich quick" or "10x returns guaranteed" in Japan. The FSA bans any marketing that implies crypto is a sure bet. Ads must be factual, clear, and avoid emotional language.- No before-and-after profit screenshots
- No celebrity endorsements promising gains
- No vague terms like "high-yield" or "risk-free"
The Application Process: Six Months Minimum
The official review period for a PSA application is six months. But that’s only the start. Most companies spend 8 to 12 months preparing before they even submit. Here’s what’s required in the application:- Company registration documents (articles of incorporation, tax ID)
- Names and backgrounds of all directors and major shareholders
- Full list of crypto assets you plan to list
- Details on how you’ll segregate customer assets
- Outsourcing agreements (if you use third-party custody or tech providers)
- Technical architecture diagrams of your systems
- Compliance manuals and internal audit procedures
What Happens After You Get Registered?
Getting approved isn’t the end. It’s the beginning of ongoing oversight.- You must submit quarterly financial reports
- You’re subject to unannounced on-site inspections
- You must report any security breaches within 24 hours
- You’re required to join the Japan Virtual Currency Exchange Association (JVCEA)
What About Security Tokens?
Not all crypto is treated the same. If your platform offers tokens that act like investments - think dividends, profit-sharing, or ownership rights - you’re no longer under the PSA. You fall under the Financial Instruments and Exchange Act (FIEA), which is even stricter. The FIEA requires full securities licensing, additional capital, and investor suitability checks. Most crypto exchanges stick to spot trading of Bitcoin and Ethereum to avoid this extra layer. But if you plan to list tokenized stocks, bonds, or real estate funds, you’ll need a completely different license.Who Can’t Get Registered?
The PSA filters out weak players. If you’re:- A startup with less than JPY 10 million in funding
- A foreign company trying to operate from overseas
- Someone without a clear compliance team in Japan
- Using unproven or unaudited tech systems
Why Japan’s Rules Matter Globally
Japan’s PSA is the most detailed crypto regulatory framework in the world. It’s not perfect - it’s slow, expensive, and complex. But it works. Registered exchanges like Bitflyer, Coincheck, and Zaif have never suffered a major hack since the rules came in. Customer trust is high. Transactions are secure. And because of that, Japan remains one of the most active crypto markets in Asia. Other countries look to Japan as a model. The U.S. SEC, the EU’s MiCA, even Singapore’s MAS - they all reference Japan’s approach when drafting their own rules. If you’re building a crypto business today, understanding the PSA isn’t just about Japan. It’s about what the future of global regulation looks like.Can a foreign company register for PSA without setting up a Japanese subsidiary?
No. The Financial Services Agency (FSA) has never approved a foreign crypto exchange operating through a branch office in Japan. All registered foreign entities must establish a Japanese kabushiki-kaisha (stock company) with local directors, a physical office, and a Japanese bank account. This ensures full legal accountability under Japanese law.
How long does PSA registration take?
The official review period is six months, but most applicants spend 8 to 12 months preparing documentation, building compliance systems, and finalizing internal controls before submitting. Delays are common if the FSA requests revisions or additional proof of systems.
What happens if a crypto exchange operates without PSA registration?
Operating without PSA registration is a criminal offense. Under Article 107 of the amended Payment Services Act, violators face confinement punishment (koukin-kei) - a form of detention under Japan’s 2022 Penal Code amendments - and fines up to JPY 3 million. The FSA also has the power to shut down websites, freeze assets, and block payments to unlicensed platforms.
Do I need to use cold wallets for all customer crypto?
Yes. At least 95% of all customer crypto assets must be stored in offline cold wallets. The remaining 5% may be kept in hot wallets for trading purposes, but only if fully insured against theft or loss. The FSA requires detailed documentation proving how assets are segregated and secured at all times.
Can I list any cryptocurrency on my exchange after registration?
No. You must list only the specific crypto assets approved in your original application. Adding new tokens later requires submitting an amendment to the FSA, which involves additional review and approval. Listing unapproved assets is a violation of your license and can lead to suspension or revocation.
garrett goggin
November 15, 2025 AT 05:00So let me get this straight - Japan wants you to build a whole damn corporation just to trade crypto? And you can’t even use a branch office? That’s not regulation, that’s a corporate hostage situation. The FSA is basically running a VIP club for billionaires with Japanese last names and a taste for bureaucracy. Meanwhile, the rest of us are out here trying to move Bitcoin without hiring a compliance officer who charges more than my rent.
And don’t even get me started on the cold wallet rule. 95% offline? That’s not security, that’s digital hoarding. If your wallet’s colder than my ex’s heart, how the hell do you even trade? You gonna send a guy in a snowsuit with a USB stick to the vault every time someone wants to buy Dogecoin?
And the advertising ban? No ‘10x returns’? Cool. So now I can’t say ‘Buy Bitcoin and retire in Bali’? What am I supposed to say? ‘Here’s a regulated financial instrument with probabilistic volatility and non-guaranteed outcomes’? Yeah, that’ll sell.
Japan’s crypto rules aren’t about protecting users. They’re about protecting the status quo. And if you’re not a Tokyo-based hedge fund with a legal team the size of a small country, you’re just a hobbyist with a dream and a death wish.
Bill Henry
November 15, 2025 AT 12:02man i just read this whole thing and i’m like wow this is insane but also kinda makes sense? like yeah if you’re gonna handle people’s money you gotta be legit. i’m from the us where half the exchanges look like they were built in a garage with a free wordpress theme and i’m like… maybe japan’s onto something. yeah it’s a pain but at least you know your coins aren’t gonna vanish overnight. also 95% cold storage? that’s smart. coincheck happened for a reason. no more lazy storage.
still… jpy 10 mil minimum? that’s like 70k usd. i could buy a used car with that. how do small teams even start? feels like the system’s rigged for big players. but hey, if it keeps people safe, maybe it’s worth it.
Jess Zafarris
November 16, 2025 AT 16:13It’s fascinating how Japan’s approach is less about stifling innovation and more about forcing accountability. You can’t just slap together a website, call it a ‘crypto exchange,’ and start taking deposits. You need real infrastructure - real people, real offices, real legal responsibility. That’s not red tape, that’s responsibility.
Compare that to places where you can register a crypto company in the Caymans and still serve US customers with a VPN and a wink. That’s not innovation. That’s evasion.
And the cold wallet rule? Genius. After Coincheck, it was obvious: if you’re holding other people’s assets, you don’t get to gamble with them. The FSA isn’t being draconian - they’re being pragmatic. The real question is why more countries haven’t copied this model instead of pretending regulation is optional.
jesani amit
November 16, 2025 AT 18:03bro this is actually really well explained and i appreciate how detailed it is. i’m from india and here we have like zero clear rules - some exchanges operate, some get shut down randomly, and users just lose everything. japan’s system is tough but fair. you know exactly what you’re getting into. yes it’s expensive and slow, but at least you’re not playing russian roulette with your crypto.
also the cold wallet thing? 100% right. if you’re storing coins online, you’re asking for trouble. and the advertising ban? finally someone gets it - crypto isn’t a lottery ticket. it’s a tool. treat it like one.
if more countries did this, we wouldn’t have half the scams we see today. respect to japan for actually doing the hard work instead of just talking.
Peter Rossiter
November 18, 2025 AT 02:3310 million yen minimum capital? lol. that’s a joke. anyone with half a brain can fake a balance sheet. the real barrier isn’t money - it’s time. six months just to submit? that’s a death sentence for startups. the FSA isn’t protecting users - they’re protecting incumbents. Bitflyer doesn’t care if you take 8 months to apply. You do. And by then your investors have already bailed.
Also the JVCEA? A self-regulatory body that can recommend revoking licenses? That’s not oversight. That’s a cartel. Welcome to the crypto mafia, Japan. They’re just nicer about it.
Mike Gransky
November 19, 2025 AT 01:20Japan’s crypto rules are the most thoughtful in the world. They don’t pretend crypto is a fad. They treat it like finance - because it is. That means rules. That means responsibility. That means no shortcuts.
The cold wallet requirement alone saves users from disasters. The compliance officer requirement ensures someone’s actually watching. The advertising ban stops people from being scammed by influencers selling ‘guaranteed’ returns.
Yes, it’s expensive. Yes, it’s slow. But look at the results: registered exchanges in Japan haven’t been hacked. Not once. That’s not luck. That’s design. Other countries should stop copying Silicon Valley’s ‘move fast and break things’ nonsense and start copying Japan’s ‘move slow and don’t steal people’s life savings’ model.
Ella Davies
November 19, 2025 AT 09:51I’ve been watching Japan’s crypto regulation for years and honestly, it’s the only model that actually works. Most countries either ban it outright or let it run wild. Japan says: if you want to do this, you have to do it right. No half-measures.
The cold wallet rule, the 95% requirement, the segregation of assets - these aren’t arbitrary. They’re lessons learned from real losses. And the fact that they require a local subsidiary? That means accountability. Someone’s physically in Japan, responsible under Japanese law. No offshore shell companies. No ‘we’re not liable’ nonsense.
It’s not perfect, but it’s the most mature framework out there. Other regulators should study it, not dismiss it.