Spooked by FTX collapse, Japan’s FSA prepares laws to prevent domestic crypto asset loss

Spurred by the collapse of FTX, Japan’s Financial Services Agency (FSA) is taking steps to prevent domestic assets from being lost in the event of similar incidents with overseas-based crypto exchanges. The FSA plans to introduce a “holding order” as part of the country’s Payment Services Act to ensure that customer assets entrusted to foreign exchanges do not flow out of Japan. This move is seen as a precautionary measure following the near-crisis caused by the collapse of FTX. The proposed amendment to the law would expand the scope of the holding order to include all virtual currency exchange companies registered under the Payment Services Act, not just those registered with the Financial Instruments and Exchange Act. Currently, registered domestic exchanges in Japan are prohibited from allowing asset leakage overseas, and the amendment would solidify this restriction regardless of an exchange’s headquarters.