Japan is taking a major step in cryptocurrency regulation by classifying digital assets as financial products under its Financial Instruments and Exchange Act, according to a report from Nikkei. The Financial Services Agency (FSA) is expected to propose legislative revisions as early as 2025, with potential enforcement by 2026.
The move aims to bring cryptocurrencies under insider trading rules, similar to traditional financial products like stocks and bonds. If implemented, crypto firms operating in Japan or offering services to Japanese customers would need to register with the FSA, significantly tightening oversight of the industry. However, it remains unclear how the new rules would apply to overseas entities.
A Distinct Category for Crypto
While cryptocurrencies will be classified as financial products, they will not be categorized as traditional securities. The distinction raises questions about how different types of digital assets—such as Bitcoin (BTC) and Ethereum (ETH) compared to riskier memecoins—will be regulated under the new framework.
Japan’s approach aligns with a broader global trend of increasing regulatory scrutiny on crypto markets to prevent market manipulation and illicit activities. The country has already taken steps to integrate digital assets into its financial system, including issuing its first stablecoin trading license to SBI VC Trade earlier this month, allowing the firm to support Circle’s USDC stablecoin.
Related: SBI Holdings & Circle Launch USDC Trading in Japan
Crypto-Friendly Reforms in Japan
Japan’s ruling Liberal Democratic Party has also advanced several pro-crypto policies. Recent reforms include slashing the capital gains tax on cryptocurrencies from 55% to 20% and recognizing digital assets as a separate asset class. Additionally, in February, reports indicated the FSA was considering lifting the ban on cryptocurrency-based exchange-traded funds (ETFs), mirroring Hong Kong’s approval of crypto ETFs in 2024.
As Japan moves towards regulatory clarity, its evolving stance on cryptocurrencies may serve as a model for other nations seeking to balance innovation with investor protection. If the proposed changes take effect, they could further legitimize digital assets within traditional financial frameworks while ensuring greater transparency in the market.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
I’m the cryptocurrency guy who loves breaking down blockchain complexity into bite-sized nuggets anyone can digest. After spending 5+ years analyzing this space, I’ve got a knack for disentangling crypto conundrums and financial markets.
