Japan FSA Flags KuCoin for Unregistered OTC Derivatives Trading

• Japan's Financial Services Agency (FSA) has issued a formal warning to KuCoin and three other platforms for operating without proper registration.
• The regulator specifically flagged KuCoin for soliciting over-the-counter (OTC) derivatives trading to residents in Japan.
• This action comes as Japan prepares to transition to a stricter legal framework under the Financial Instruments and Exchange Act.

Regulatory Scrutiny of Unregistered Platforms

In a recent update on Thursday, the Financial Services Agency (FSA) of Japan added KuCoin, NeonFX, theoption, and GTCFX to its list of entities conducting financial business without the necessary authorization. The notice highlighted that these platforms were actively promoting OTC derivatives trading via the internet. While several firms were named, the FSA specifically identified KuCoin, which is based in the Seychelles, as a platform targeting Japanese residents, whereas the others maintain a more general international presence.

A History of Compliance Issues

This is not the first time KuCoin has faced pressure from Japanese authorities. In November 2024, the FSA issued a similar warning to the exchange and others, including Bybit, for providing services to the local population without registration. The situation escalated in February 2025, when the financial watchdog formally requested that Apple and Google remove the KuCoin application from their respective app stores to prevent further downloads by Japanese users.

Market Context and Legal Reform

Japan remains a significant hub for digital assets, with the FSA reporting over 12 million crypto accounts as of February 2025, out of a total population of approximately 123 million. The nation also secured the 19th spot in the 2025 Global Crypto Adoption Index by Chainalysis.

To better manage this high volume of activity, the government is moving away from the Payment Services Act in favor of the Financial Instruments and Exchange Act. This legislative shift is expected to:

• Increase reporting requirements for initial exchange offerings (IEOs) and token issuers.
• Grant regulators broader enforcement powers against platforms operating outside the legal framework.
• Enhance oversight of the rapidly evolving crypto landscape.

In a separate incident highlighting the sensitivity of the market, Prime Minister Sanae Takaichi, who took office in October 2025, recently denied any involvement with a project called the Sanae token. The token's market value reached $28 million before a sudden collapse, prompting reports that the FSA may launch an investigation into the matter.