Once one of the largest, most established exchanges for the cryptocurrency, MtGox collapsed in 2014 after a suspected theft worth nearly half a billion dollars, which hammered the digital currency's reputation.
Japanese lawmakers passed a bill late yesterday stipulating that all "virtual currency" exchanges must be regulated by the country's Financial Services Agency.
The new law defines a virtual currency as something with an "asset-like nature" that can be exchanged for goods and services.
The new legislation aims to "tackle issues of money-laundering and protect users", Japan's Financial Services Agency said in a statement.
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Critics of the virtual currency movement say its anonymity and lack of regulation make it ideal for use by criminals.
Other G7 countries have either introduced, or are in the process of trying to introduce, similar legislation, after voicing support for "appropriate regulation" of virtual currencies at a 2015 meeting.
Japan's new law comes after prosecutors last year charged France-born MtGox head Mark Karpeles, with embezzlement, amid fraud allegations over the disappearance of hundreds of millions of dollars worth of the virtual currency.
The exchange, which once said it handled around 80 percent of global Bitcoin transactions, filed for bankruptcy protection soon after the cyber-money went missing, leaving a trail of angry investors calling for answers.
The company initially said there was a bug in the software underpinning Bitcoins that allowed hackers to pilfer them.
Karpeles later claimed he had found some 200,000 of the lost coins in a "cold wallet" -- a storage device, such as a memory stick, that is not connected to other computers.