PSA Registration Requirements for Crypto Exchanges in Japan 2025

If you want to run a cryptocurrency exchange in Japan, you can’t just set up a website and start accepting users. The rules are strict, detailed, and enforced with real consequences. Since 2017, Japan has required all crypto exchanges to register under the Payment Services Act (PSA) - and by 2025, those rules are tighter than ever. This isn’t a suggestion. It’s the law. Operating without registration can land you in court, with fines up to JPY 3 million and confinement punishment (koukin-kei) replacing jail time under the 2022 Penal Code amendments.

What Exactly Is the PSA?

The Payment Services Act (PSA) defines what counts as a crypto-asset in Japan: any digital payment mechanism not tied to yen or any foreign currency, usable to pay unidentified people. That means Bitcoin, Ethereum, and most major coins qualify. But prepaid cards backed by yen? Not crypto. Bank-issued digital coins? Not crypto. Only unbacked, decentralized digital assets fall under the PSA.

Under Article 63-2 of the PSA, anyone running a business that buys or sells crypto-assets must register as a Crypto Asset Exchange Service Provider (CAESP) with Japan’s Financial Services Agency (FSA). No exceptions. No gray areas. If you’re trading crypto for profit and serving Japanese users, you’re legally required to register - even if your company is based overseas.

Who Can Apply for PSA Registration?

Only two types of entities qualify: Japanese stock companies (kabushiki-kaisha) or foreign companies that set up a legal subsidiary in Japan. Foreign firms can’t just open a branch and apply. Despite the law allowing branches, the FSA has never approved one. Every foreign crypto exchange operating legally in Japan - including Binance, Kraken, and Bitflyer - did it by forming a local subsidiary.

That means you need to incorporate a new company in Japan, hire local staff, open a Japanese bank account, and appoint a resident representative. It’s not a paperwork exercise - it’s a full operational setup. You’re not just applying for a license. You’re building a Japanese business from the ground up.

The Financial Requirements: No Cheap Entry

The FSA doesn’t let just anyone in. You need a minimum of JPY 10 million (about $65,000 USD) in capital. But that’s not enough. Your net assets must also be positive. That means you can’t register if you’re in debt or barely breaking even. You need real financial strength - enough to cover losses, system failures, or sudden regulatory demands.

This isn’t about profit. It’s about safety. The FSA wants exchanges that can survive a market crash, a hack, or a compliance audit without collapsing. Small operators, indie devs, or underfunded startups rarely make it past this stage. The bar is set high on purpose - to keep unstable or risky players out of the market.

Compliance Systems: More Than Just Paperwork

Registration isn’t about submitting a form. It’s about proving you’ve built systems that can’t be hacked, misused, or manipulated. You need detailed documentation showing:

• How you separate customer crypto from your own funds
• How you store 95% or more of user assets in offline cold wallets
• Your KYC and AML procedures for verifying users
• How you handle internal audits and employee training
• Your plan for outsourcing (if any) - and why it’s secure
• Your disaster recovery and cybersecurity protocols

The FSA doesn’t just read this. They test it. They ask for screenshots, logs, and real-time demonstrations. They interview your compliance officers. They check if your software actually does what you say it does.

Many applicants fail because they think they can fake it. They copy templates from other companies. They hire consultants who don’t understand Japan’s rules. The FSA spots that instantly. They’ve seen it all before.

What Crypto Assets Can You List?

You can’t just list every coin you find on CoinMarketCap. The FSA requires you to specify exactly which crypto-assets you plan to trade - and justify why each one is safe and legitimate. If you want to list a new token, you need to prove it’s not a security, not a scam, and not a wash-trading scheme.

This is where the PSA and the Financial Instruments and Exchange Act (FIEA) split. If a token acts like a stock - offering profit-sharing, dividends, or investment rights - it’s not covered by the PSA. It falls under FIEA, which has even stricter rules, like mandatory prospectuses and investor suitability checks. Most exchanges stick to spot trading of Bitcoin, Ethereum, and other major coins to avoid FIEA’s heavier burden.

Marketing and Advertising: No Hype Allowed

You can’t say “Get rich quick with Bitcoin!” or “10x returns guaranteed!” in Japan. The FSA bans misleading advertising outright. Any promotional material must be factual, clear, and include risk disclosures. No flashy videos. No influencer endorsements promising profits. No fake testimonials.

In 2024, the FSA fined a major exchange JPY 12 million for using YouTube influencers who said “Buy now before it hits $100K.” The ad was removed. The company had to issue a public apology. That’s how seriously they take this.

The Process: Six Months - And That’s Just the Start

The official review period for a PSA application is up to six months. But most companies spend 12 to 18 months preparing before they even submit. Why? Because you need to:

1. Incorporate a Japanese subsidiary
2. Set up bank accounts and accounting systems
3. Build and test cold storage infrastructure
4. Hire compliance officers and legal counsel
5. Train staff on FSA guidelines
6. Document every single process
7. Run internal audits
8. Submit the application
9. Respond to FSA questions
10. Pass on-site inspections

There’s no shortcut. No fast-track. No paying extra to move ahead. The FSA doesn’t rush. They take their time - and they expect you to be ready.

What Happens After You Get Registered?

Getting registered isn’t the end. It’s the beginning of constant oversight. The FSA conducts annual inspections. They can request documents anytime. They monitor your trading volume, your cold wallet balances, your user complaints. If you miss a report, if your cold storage drops below 95%, if your KYC fails - you get a warning. Then a fine. Then suspension. Then revocation.

You’re also required to join the Japan Virtual Currency Exchange Association (JVCEA), a self-regulatory body that adds another layer of scrutiny. JVCEA members must follow additional rules on transparency, dispute resolution, and user education.

Why Japan’s Rules Are So Tough - And Why That Matters

Japan doesn’t ban crypto. In fact, it’s one of the few countries that legally recognizes Bitcoin as property. But it refuses to let the wild west of crypto thrive on its soil. The goal isn’t to stop innovation. It’s to protect ordinary people from fraud, theft, and scams.

After the 2018 Coincheck hack that lost $530 million in NEM tokens, Japan rebuilt its entire system. The PSA rules were born from that disaster. Every requirement - from cold storage to segregation of funds - was added because someone lost money.

That’s why Japan has fewer exchanges than the U.S. or South Korea. But it also has fewer major hacks. And more trust from users. Japanese consumers know that if they use a registered exchange, their coins are protected by law - not just by a company’s promises.

Who Should Try to Register?

Only two types of companies belong here:

• Well-funded startups with serious technical teams and legal budgets
• Established financial institutions looking to expand into crypto

If you’re a solo developer, a small team with $50,000 in savings, or a company that’s never operated in Asia - don’t even start. The cost, time, and risk are too high. You’ll burn through your capital before you get approved.

What If You Don’t Register?

Running an unlicensed exchange in Japan is a criminal offense. The FSA doesn’t just shut you down - they can pursue criminal charges. Even if you’re based overseas, if Japanese users are trading on your platform, you’re breaking Japanese law. The FSA has worked with international regulators to freeze assets and block domains of unregistered platforms.

Some operators try to hide behind offshore domains or anonymous teams. The FSA doesn’t care. They track IP addresses, payment processors, and user data. They don’t need to catch you in Japan - they just need to prove Japanese users are using your service.

What’s New in 2025?

This year, a new amendment to the PSA was submitted to Japan’s Diet. It gives the FSA the power to issue direct orders to exchanges - not just warnings or fines. If an exchange fails to fix a security flaw, the FSA can now order them to stop trading, freeze assets, or shut down specific services immediately.

This isn’t a small tweak. It’s a shift from reactive enforcement to proactive control. The message is clear: compliance isn’t optional. It’s continuous.

Next Steps for Applicants

If you’re serious about registering:

1. Hire a Japanese legal and compliance team - don’t rely on overseas lawyers.
2. Start incorporating your subsidiary now - it takes 3-6 months alone.
3. Build your cold wallet system with certified hardware and multi-sig protocols.
4. Document every internal process - from user onboarding to incident response.
5. Join JVCEA early - they offer guidance and pre-review checks.
6. Expect delays. The FSA doesn’t rush. Neither should you.

Japan’s crypto market isn’t the easiest. But it’s the most stable. And for businesses that want to operate long-term, with real users and trust - it’s the only one that matters.