How to Choose a Cryptocurrency Exchange and the

Is It Illegal to Use Overseas Cryptocurrency Exchanges?

Is using overseas cryptocurrency exchanges illegal in Japan? In summary, Japanese residents are not prohibited from accessing overseas cryptocurrency exchanges. Current Japanese law mandates that crypto asset exchange operators must register with the Financial Services Agency (FSA), but imposes no direct restrictions on individual users.

Many investors are confused by this point, but legally, there is a clear distinction between operating an exchange and using one as a customer. Operating an unregistered exchange is illegal, but there are no laws that prohibit individuals from using the services of such exchanges.

Legal Basis

The Japanese Payment Services Act requires that any crypto asset exchange business register with the Prime Minister. This law targets those providing “crypto asset exchange services,” not individual users.

Specifically, the law requires exchanges to implement proper security measures and protect customer assets, but it does not limit which exchanges investors may choose. As a result, while operating an unregistered crypto exchange is illegal, there are no legal restrictions preventing individuals from accessing unregistered exchanges.

Registration Status of Overseas Exchanges and Common Misunderstandings

Many overseas exchanges are not registered with the FSA, which understandably makes some users in Japan uneasy. There have also been instances where exchanges restricted access for Japanese users after receiving instructions from the FSA.

These cases have contributed to the widespread misunderstanding that “overseas exchanges are illegal.” However, it is not illegal for Japanese individuals to use unregistered exchanges. Still, if an exchange receives warnings or directives from the FSA, there is a risk that access may be restricted in the future, so users should exercise caution.

Security Considerations

Nonetheless, unregistered overseas exchanges may pose security risks, such as hacking incidents or the listing of fraudulent cryptocurrencies.

Domestic exchanges registered with the FSA are subject to stringent oversight and must meet robust security standards. In contrast, security levels can vary widely among overseas exchanges, depending on local regulations. Always review the management and security measures of any overseas exchange before using it.

Key Factors When Choosing a Cryptocurrency Exchange

There are several important factors to check when choosing a cryptocurrency exchange. Selecting the right exchange ensures a secure and efficient trading environment. Below are five key points to consider in detail.

1. Security

Security must always be your top priority. Safeguarding client assets is essential in crypto trading, so it’s vital to check what security measures the exchange implements.

Exchanges with weak security controls are at greater risk of asset loss due to hacking or unauthorized access. There have been several large-scale hacks resulting in major customer losses. Look for the following security measures in particular:

• Two-factor authentication: Prevents unauthorized access by requiring additional verification for logins or withdrawals.
• SSL encryption: Protects data transmissions from eavesdropping by encrypting the connection.
• Cold wallet storage: Keeps assets offline to minimize hacking risks. Learn more about cold wallets.

Also verify server stability, anti-hacking protocols, and the quality of customer support. An exchange with robust security allows you to trade with greater peace of mind.

2. Number of Listed Tokens

The number of tokens available is another critical consideration. While nearly every exchange supports Bitcoin and Ethereum, listings for other altcoins vary.

More listed tokens mean more investment opportunities. If you want to invest in new project tokens or sector-specific assets, the diversity of available tokens is key.

• Some exchanges offer not only major altcoins but also minor coins.
• For future investment opportunities, consider exchanges with broad token listings.
• However, some tokens may lack liquidity, so thorough research is necessary before trading.

3. Fees

Fees are a crucial factor in choosing an exchange. Review trading fees, spreads (the difference between buy and sell prices), deposit fees, and withdrawal fees.

Low fees help reduce your trading costs. Even small fee differences can add up for active traders. For example, a 0.1% difference per trade can become significant over hundreds of transactions per year.

Compare multiple exchanges for long-term cost efficiency. Small differences in fees can have a major impact for frequent traders. Some exchanges also offer fee discounts for holding their native tokens, which is worth considering.

4. Usability and Convenience

User experience matters. Intuitive, easy-to-use trading platforms make a big difference. You want an interface that lets you trade smoothly and efficiently.

Beginners may avoid exchanges with complex operations, while experienced traders may prefer advanced charting and order tools.

• Evaluate the usability of mobile apps and the ease of executing trades.
• For beginners, simple interfaces are recommended.
• Japanese language support is an important criterion for Japanese users.

5. Reliability and Regulatory Compliance

Finally, always check the reliability of the exchange. To use overseas exchanges safely, choose those that publish due diligence and Merkle tree proof-of-reserves.

Consider the exchange’s track record, any security incidents, regulatory status, and whether it undergoes third-party audits.

Enhancing Transparency Through Due Diligence

• Risk assessment: Due diligence involves in-depth third-party investigations of the risks associated with a company or project, with findings published for investors. This process increases transparency and helps investors understand potential risks by reviewing financials, executive backgrounds, and security frameworks.

Merkle Trees for Transparency

• Preventing Data Tampering: Merkle tree structures record data hierarchically on the blockchain, enabling efficient, comprehensive verification. Tampering is quickly detected, which enhances trust and transparency for transactions and asset management. Many reputable exchanges use Merkle trees for proof-of-reserves, disclosing the status of client assets.

Pros and Cons of Using Overseas Crypto Exchanges

Using overseas crypto exchanges can offer unique advantages not found at domestic exchanges, but there are also important risks to consider. Below, we break down both sides.

Advantages of Overseas Crypto Exchanges

1. Wide Selection of Tokens

Overseas exchanges typically list many more tokens. Some major platforms offer thousands, while others list several hundred—far more than Japanese exchanges.

Investing in minor coins and new projects not available domestically is a real advantage, especially for those seeking early access to projects with high growth potential.

• Overseas exchanges often list more trend-setting tokens than the carefully selected options on domestic platforms.
• However, some coins may have low liquidity, so research is essential.
• New tokens are listed quickly, giving you early access to trending projects.

2. Low Spreads and Fees

Overseas exchanges generally offer narrower spreads, which reduces costs for frequent traders. The spread is the difference between buy and sell prices—the narrower it is, the lower your trading cost.

Many users choose overseas exchanges for the low spreads, which is especially advantageous for day traders or scalpers. Narrow spreads can have a direct impact on profitability.

• Spreads are often lower than domestic exchanges, helping you minimize costs.
• Short-term trading is especially favored; for long-term investing, the impact is less pronounced.
• Trading fees are also typically lower.

3. High Leverage Trading

Overseas exchanges may offer leverage of 100x or more, compared to Japan’s 2x limit. Leverage allows for larger trades with less capital but increases both profit and loss potential.

Many overseas exchanges feature a zero-cut system, which automatically liquidates positions to prevent losses exceeding deposited margin—eliminating the risk of debt. This is a major advantage over domestic exchanges.

• Open large positions with minimal capital.
• Zero-cut systems eliminate the risk of margin calls.
• High leverage means high risk—manage your capital carefully.

Disadvantages of Overseas Crypto Exchanges

1. Language Support

Some overseas exchanges offer support only in English. While this doesn’t usually affect day-to-day trading, you may need translation tools when making inquiries.

Language barriers can slow down support, especially during problems. However, many leading exchanges now offer Japanese support, and the situation is improving.

2. No Direct JPY Withdrawals

You cannot withdraw directly from overseas exchanges to a Japanese bank account. You’ll need to send your crypto to a domestic exchange, convert it to yen, and then withdraw—an extra step that may incur fees and be affected by exchange rates.

3. Hacking Risks

Overseas exchanges are not immune to hacking, and there have been several incidents. Protect your assets by spreading funds across multiple exchanges and using cold wallets.

Security standards vary, especially at exchanges outside FSA oversight, so thorough research is required. If an exchange fails, your assets may not be protected—avoid keeping large sums on any one platform for extended periods.

4. Risk of Sudden Service Suspension

Overseas exchanges may restrict Japanese users if they receive warnings from the FSA or due to business developments. Some global platforms have closed Japanese subsidiaries or blocked Japanese users in the past.

Service availability can change unexpectedly. To mitigate this risk, diversify assets across multiple exchanges and keep up with regulatory updates.

Understanding the Travel Rule When Using Overseas Exchanges

The Travel Rule requires exchanges to share sender and recipient details with the receiving exchange for crypto transfers. In Japan, this was introduced to combat money laundering through amendments to the Act on Prevention of Transfer of Criminal Proceeds.

This compliance requirement significantly impacts users, as domestic exchanges must gather and share information for anti-terrorism financing. The Travel Rule is an international standard, and similar regulations have been adopted globally.

1. Detailed Transfer Information Is Required

When sending crypto from a Japanese exchange to an overseas exchange, the Travel Rule requires you to provide both sender and recipient details, including names, customer IDs, and blockchain addresses.

Requirements may differ between exchanges, so check in advance. This process is crucial for preventing money laundering and terrorism financing, and user cooperation is essential.

2. Transfers Not Possible Between Incompatible Solutions

Domestic exchanges use different Travel Rule solutions, like TRUST or Sygna, and transfers are not possible between exchanges using incompatible systems. Overseas exchanges may use different solutions as well, so verify compatibility before sending assets.

This is a major hurdle in the early stages of Travel Rule adoption, but interoperability is expected to improve over time.

3. Some Crypto Assets Cannot Be Sent

Even if a domestic exchange supports a particular token, the Travel Rule may prevent transfers. TRUST-compliant exchanges, for example, may support Bitcoin (BTC) and Ethereum (ETH) transfers but restrict others.

Always confirm which tokens can be sent overseas. In particular, minor altcoins may be subject to restrictions, so check with the exchange before transferring.

Top 5 Overseas Crypto Exchanges

Below are five major overseas crypto exchanges that are reliable and accessible for Japanese users. Each exchange’s features and important notes are explained to help you choose the best one for your investment style.

1: Major Global Platform A

This exchange was founded in Singapore and is now based in Dubai. It offers Japanese language support and more than 300 tokens, making it especially accessible for Japanese users.

Key Features

This exchange offers leverage trading up to 100x, allowing you to control large positions with relatively small capital. The zero-cut system automatically limits losses, streamlining risk management.

Additional highlights include:

• Japanese language support: Both the website and app are available in Japanese, and customer support is responsive and beginner-friendly.
• Extensive token selection: More than 350 crypto assets are listed, including major coins and new project tokens, providing ample early investment opportunities.
• User-friendly interface: The platform is intuitive and easy to use for both beginners and advanced traders.

Points to Note

1. No direct JPY deposits/withdrawals

Direct deposits and withdrawals in Japanese yen are not supported. You must purchase crypto at a domestic exchange and then transfer it, incurring potential fees and manual steps.

2. No trust asset protection

This exchange is not FSA-registered, so client funds are not held in trust. If the exchange fails, your assets may not be protected. Avoid large, long-term deposits, and consider using a cold wallet for added security.

• Security: ★★★☆☆
• Ease of Use: ★★★★★
• Fees: ★★★★☆

2: Major Global Platform B

This global exchange is based in the Cayman Islands and is popular for its derivatives and copy trading features. With Japanese language support and a user-friendly mobile app, it has over 20 million users worldwide.

Trading fees are low at 0.02% for makers and 0.06% for takers, making it accessible for all levels of traders.

Key Features

You can trade with up to 125x leverage, making it attractive for high-return strategies. The zero-cut system protects users from losing more than their margin, making leverage trading accessible and safer for beginners. Learn more about leverage trading.

Its copy trading feature lets users follow and automatically replicate the trades of professional traders, making crypto trading easy for those with little experience.

Just select a pro trader and set your trading parameters to get started. The exchange offers:

• Futures copy trading (high risk, high return)
• Spot copy trading (lower risk)
• Strategy bot copy trading (automated trading)

The exchange also emphasizes asset protection, publishing asset transparency via Merkle Tree Proof-of-Reserves and maintaining a reserve ratio above 200%—demonstrating a strong commitment to user fund safety.

Points to Note

This exchange is not FSA-registered, so regulatory risk in Japan cannot be ruled out. Like other overseas platforms, it does not support direct JPY deposits or withdrawals—crypto must be purchased domestically and transferred in.

• Security: ★★★★☆
• Ease of Use: ★★★★☆
• Fees: ★★★★☆

3: Major Global Platform C

This Hong Kong-based exchange offers a vast range of tokens and user-participation events, including over 700 listed altcoins—one of the highest in the industry.

Key Features

1. Extensive Token Selection

With over 700 tokens, this exchange offers one of the industry’s largest selections, making it especially appealing for those interested in minor coins and emerging projects. Rapid listings allow investors to access promising tokens early.

2. Low Fees

Spot trading fees are just 0.1%, among the lowest industry-wide, and deposits/withdrawals are free—ideal for frequent or small-scale traders.

3. Beginner-Friendly Japanese Support

The website and FAQ are available in Japanese, and the mobile app is easy to use, making it accessible for beginners.

Points to Note

This exchange has been hacked in the past, leading to a major asset loss, but it fully compensated users and has since implemented strong security measures. Still, always check current security conditions before using the platform.

As with other overseas exchanges, client funds may not be protected in case of failure. Also, the platform operates from Hong Kong and could be affected by regulatory changes in China—monitor regulatory developments carefully.

• Security: ★★★☆☆
• Ease of Use: ★★★☆☆
• Fees: ★★★★★

4: Major Global Platform D

This global exchange serves over five million users in more than 100 countries. Its advanced features and user-oriented design have made it popular among all levels of traders.

The copy trading function stands out, allowing users to follow the trades of experienced professionals, which is especially helpful for those new to derivatives trading.

Key Features

• Comprehensive Trading Tools: Supports MetaTrader 5 (MT5) and offers FX, indices, and precious metals in addition to crypto. The platform supports copy trading, futures, and grid trading for a wide range of investment strategies.
• Asset Protection: Proof-of-reserves is provided via third-party audit; AI-driven KYC and bank-level security ensure a safe trading environment.

Over 600 cryptocurrencies are supported, and full Japanese language support makes the platform accessible for Japanese users.

Points to Note

The exchange is not FSA-registered, so regulatory risk remains, and it lacks DeFi, staking, and lending features. Fees are higher than some competitors, and the platform may be complex for beginners. As with other overseas exchanges, client assets may not be protected in case of failure, and the exchange has previously suffered a major hack.

• Security: ★★★☆☆
• Ease of Use: ★★★★☆
• Fees: ★★★★☆

5: Major Global Platform E

This Singapore-based exchange far exceeds competitors with thousands of listed assets. It also excels in quick new listings, enabling early investment in promising tokens.

Main features include:

• Japanese Customer Support: The website, app, and support staff are all available in Japanese for prompt and reliable service.
• Native Token Benefits: Holding the platform’s token offers fee discounts, priority IEO access, and voting rights for new listings, combining lower costs with more investment opportunities.
• Credit Card Purchases: Users can purchase crypto with yen by credit card, making it fast and easy to get started without a domestic exchange.

The platform’s greatest advantage is its massive asset selection and rapid listing of new coins, especially for early access to minor or just-launched tokens.

Points to Note

Direct yen trading is not supported. Users must transfer crypto from a domestic exchange or use a credit card, with associated fees and exchange rates. Trading fees are higher than some competitors, but holding the native token provides discounts. As always, client funds may not be protected if the exchange fails.

• Security: ★★★☆☆
• Ease of Use: ★★★★☆
• Fees: ★★★☆☆

Summary: Choose Overseas Exchanges Carefully Based on Your Needs

Overseas crypto exchanges provide tokens and advanced trading functions that domestic exchanges do not, making them attractive for investors seeking greater variety. However, they operate under different regulations, so pay close attention to security and client asset protection.

Regulations such as the Travel Rule require users to provide information and verify the receiving exchange. This article compares popular overseas exchanges and explains the key points for risk management and maximizing benefits.

By choosing the right exchange and preparing for risks, you can maximize your investment opportunities. In particular, consider the following:

• Are security protocols robust?
• Do listed tokens align with your investment goals?
• Are fees reasonable?
• Is Japanese language support available?
• How has the exchange handled past security issues?

Evaluate these factors comprehensively and choose an exchange that aligns with your investment style and risk profile. This is a crucial first step for successful crypto investing.

FAQ

What are the key factors when choosing an overseas crypto exchange?

Security, token selection, trading volume, fee structure, and the usability of trading tools are all critical. Check licensing and Japanese language support as well.

How can I confirm a crypto exchange’s safety?

Look for ISO 27001 certification, two-factor authentication, cold wallet storage, and membership in an FSA-certified self-regulatory group. These are key indicators of safety.

What are the main differences between overseas and domestic exchanges?

Overseas exchanges are less tightly regulated and offer higher leverage and more bonuses, while domestic exchanges are subject to strict regulation and tend to be safer and more reliable. Overseas exchanges also offer more trading pairs and volume.

Which overseas exchanges are recommended for beginners?

BYBIT and Coinlist are recommended for beginners, offering user-friendly interfaces, comprehensive support, and high trading volumes for a smooth experience.

What should I check when comparing crypto exchange fees?

Check trading, withdrawal, and deposit fees, and look for available fee discounts. Be wary of hidden fees and compare total costs.

Are there any tax considerations when using overseas exchanges?

When using overseas exchanges, keep detailed records of your trades and report all profits as income. Comply with your country’s tax regulations and do not neglect mandatory reporting to tax authorities.