Japan is set to allow trust banks to manage crypto assets later this year, financial regulators have announced.
The Financial Services Agency (FSA) will reportedly propose the changes after a month-long public comment period.
With the amendment, Nikkei reported that the FSA is aiming to strengthen investor protection and accelerate crypto market formation by deregulating trust banks.
This will allow them to handle crypto assets, which the agency states are “volatile” and “involves high levels of risk.” The report noted that the new law is likely to become effective “as early as Autumn” this year.
Deregulation of trust banks
While there are no restrictions on owning and trading digital assets, trust banks faced regulatory limitations when it came to managing crypto. However, that might be about to change as Japan brings several changes to how the sector is governed.
Last month, the country became the first significant economy after the Terra collapse to pass a bill to regulate stablecoins. The change made way for licensed banks and registered financial institutions to be able to issue stablecoins from next year.
There are 13 registered trust banks in the country, including SMBC, Sumitomo Mitsui, Nomura Trust and Banking, and Mitsubishi UFJ Trust and Banking Corporation, among others.
In March, Sumitomo Mitsui Trust Holdings (SuMi) also announced a collaboration with Japanese crypto exchange Bitbank to manage digital assets for its clients.
The launch allowed mainstreaming of crypto offerings. Reuters reported last year that a consortium of around 70 Japanese firms was planning a yen-based cryptocurrency launch this year.
Japan makes way for Web3
Meanwhile, one of Japan’s biggest brokerages, Nomura Holdings, has been offering bitcoin derivatives in the country. Global crypto exchange FTX has also recently expanded into Japan, estimating the potential crypto market size at almost $1 trillion.
Last month, Japanese Prime Minister Fumio Kishida told Parliament that he is “convinced that Web3 will lead to the economic growth of Japan”. He also mentioned the necessity of improving the virtual environment.
As the country looks to better regulate the sector, recent reports have also underlined that the country is considering a proposal to confiscate illegally acquired crypto assets to put a stop to organized crimes in the virtual domain.