Japan’s Financial Services Agency (FSA) is mulling reform that would allow banks to acquire and hold digital assets such as bitcoin for investment purposes, according to a report from Japanese newspaper Yomiuri.
The system will allow banks to trade cryptocurrencies in the same way as stocks and government bonds, while implementing certain regulations to ensure their financial stability.
The FSA is also considering registering banking groups as “cryptocurrency exchange operators”, allowing them to offer trading and exchange services, a move aimed at facilitating the investment process by involving credible banking groups.
The next meeting of the working group of the Financial Services Council, an advisory body to the Prime Minister, is expected to discuss the new reform.
The plan is in line with the growing adoption of digital assets around the world, including in the United States, and marks a departure from the 2020 directive that prohibited local banks from acquiring cryptocurrencies for investment purposes.
Japan’s growing openness to cryptocurrencies comes at a critical time as the country grapples with an exceptionally high debt-to-GDP ratio of 240%.
This unsustainable level of debt is expected to result in financial repression, such as low interest rates, high inflation and increased regulation, to manage the debt burden. In this context, cryptocurrencies could appear as attractive safety valves for investors looking for alternatives to traditional financial systems.
