Japan is set to revamp its cryptocurrency regulations, marking the biggest change in nearly a decade. The new framework will treat digital assets more like traditional investment products, aiming to enhance investor protection and regulatory clarity.
Shift to Securities Law
The Financial Services Agency (FSA) recently released a report outlining the plan to move crypto regulation from the Payment Services Act to the Financial Instruments and Exchange Act. This change places cryptocurrencies under the same legal umbrella as securities trading, disclosures, and market conduct rules.
According to government data, over 86% of domestic users trade cryptocurrencies with an expectation of long‑term price gains, and deposits on registered platforms have surpassed five trillion yen. Regulators believe the current framework no longer matches the risks posed by a sector dominated by speculative trading and large investor inflows.
Stricter Disclosure Requirements
The new rules will impose stricter disclosure requirements, particularly for token sales conducted by exchanges. The report highlights the need for pre‑sale information, independent code audits, and clearer descriptions of project controllers. Even fully decentralized assets will come under closer scrutiny, with exchanges responsible for providing users with neutral risk assessments based on verifiable data.
The recommendations also call for explicit insider‑trading rules covering events such as token listings, major system breaches, and large‑scale sales by issuers. These provisions would apply to exchange employees, token developers, and other related parties who may access undisclosed information.
Involvement of Financial Institutions
Exchanges operating in Japan will face standards similar to brokers dealing in securities. They will be required to assess users’ risk tolerance before permitting complex or highly volatile trading. The plan also introduces investment limits for token offerings that have not completed financial audits, aiming to prevent retail users from being exposed to sudden selling pressure once trading begins.
Traditional financial institutions are expected to play a greater role as well. While banks and insurers will remain barred from running exchanges directly, regulators intend to let their subsidiaries offer crypto trading through highly supervised channels.
Related Policies and Tax Reform
The planned transition comes alongside a series of related policies. In November, the FSA proposed a registration system for custody providers and outsourced trading software firms following the DMM Bitcoin breach. Officials also confirmed support for a joint stablecoin pilot involving Japan’s three largest banks.
Other proposals under review include allowing banking groups to register as exchange operators, expanding access for retail investors, and bringing crypto management closer to the structure used for stocks and government bonds.
Tax reform is also advancing. The government is preparing to replace the current progressive tax rate, which can rise to 55%, with a flat 20% levy on crypto gains beginning in 2026.
Conclusion
Japan’s move to treat cryptocurrencies as securities marks a significant shift in regulatory approach, aiming to enhance investor protection and market stability. The new framework will impose stricter disclosure requirements, prevent insider trading, and involve traditional financial institutions in crypto trading.
Headline: Japan Overhauls Crypto Regulations, Treating Digital Assets as Securities
