Domestic VASP Cold Storage 95% + Segregated Management Regime

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This entry sits under exchanges index. Read it against FSA crypto-asset exchange registration system — number system / Local Finance Bureau jurisdiction / registration requirements for peer / contrast context and Japan Financial Regulation — Legal Framework for Tokens, Crypto Assets, and Payments for the broader system / regulatory boundary.

Regime Overview

Under the amended Payment Services Act Enforcement Regulations (in force 2020-05 ), domestic VASPs are subject to an obligation to hold 95% or more of the crypto-assets entrusted by customers in cold wallets (offline environment). Only the remaining 5% or less is permitted for hot operation (as withdrawal funding / liquidity reserve). The direct trigger was the 2018-01 Coincheck NEM 580 億円 outflow incident under jp-vasp-incident-history. Reflecting the lesson that the entire NEM holding was under hot custody at the time of the incident, this was introduced as a regulatory reflex applied across the whole industry. A violation constitutes grounds for a business improvement order (see fsa-business-improvement-orders-history).

Definition of Cold / Hot and Exceptions

“Cold” refers to a signing environment physically disconnected from the network (air-gapped). As a rule, key generation and signing are performed on offline terminals, and only the signed TX is moved over the network. When a multisig (M-of-N) configuration or an HSM (Hardware Security Module) is used, it may be certified as “cold-equivalent” depending on the operational design (reviewed case-by-case under the JVCEA self-regulatory guidelines). MPC (Multi-Party Computation) type is an emerging technology for which the certification framework is still being developed.

The 3 Forms of Segregated Management

Trust type (strongest legal segregation): Customer crypto-assets are entrusted to a trust bank, giving the strongest bankruptcy remoteness in legal terms. Sumitomo Mitsui Trust and Mitsubishi UFJ Trust are the principal trustees.
Individual management type (internal segregation): Own assets and customer assets are managed in separate accounts, separate wallets, and separate bookkeeping. This is technical segregation, but its legal bankruptcy remoteness is weaker than the trust type.
Hybrid type: A pragmatic operation of partly trust + partly individual. The majority of major VASPs adopt this form.

Operational Examples of Major Domestic VASPs

jp-exchange-bitflyer: trust + partly individual (hybrid type)
jp-exchange-gmo-coin: centered on individual management type
jp-exchange-coincheck: fully shifted to trust type after the 2018 incident
jp-exchange-sbi-vc-trade: makes heavy use of the trust type (leveraging an SBI group trust bank)

Global Comparison

US NYDFS BitLicense: trust-bank segregation obligation; the rise of Trust-Charter-type custodians (Coinbase Custody Trust, etc.)
Hong Kong SFC Type 1 + VASP license: co-mingling with customer assets prohibited; a route through an independent Trust Company is mandatory
EU MiCA CASP (in force 2024 ): full segregated-custody obligation for customer assets; third-party custodians permitted