Japan’s regulators are preparing a major reshaping of how cryptocurrency assets are supervised, planning to move them out of the country’s payments-focused rules and into a framework typically used for investment products and securities markets.

The Financial Services Agency (FSA) published an extensive report from the Financial System Council’s Working Group, evaluating how cryptocurrency assets should be governed across multiple industries. The report outlines a proposal to shift legal authority from the Payment Services Act to the Financial Instruments and Exchange Act — the main law covering securities issuance, market conduct and disclosure obligations.

The working group noted that “crypto assets are increasingly being used as investment targets both domestically and internationally,” and pointed to the importance of treating them as financial instruments to ensure stronger user protection.

Reinforcing transparency for token sales

A significant consequence of bringing the sector under FIEA supervision is a planned expansion of disclosure rules for initial exchange offerings, where tokens are issued and sold through crypto trading platforms. According to the document, “crypto transactions conducted by users are similar to securities transactions, and may involve the sale of new crypto assets or the buying and selling already in circulation,” which is why timely and reliable information is being prioritized.

The proposal calls for exchanges to provide detailed disclosures before token sales begin, including information on the key entities behind a project. It would also introduce mandatory third-party code audits and encourage input from self-regulatory organizations. Issuers themselves would face new transparency requirements, including identifying who they are — even in cases where the project operates through decentralized structures — and explaining how tokens are created and allocated.

Stronger enforcement and global alignment

The framework would grant regulators clearer authority to act against unregistered platforms, particularly those based overseas or connected to decentralized exchanges. It also introduces explicit rules against insider trading, aligning Japan’s approach with elements of the European Union’s MiCA regime and South Korea’s recent updates.

The developments arrive as lawmakers consider applying a flat 20% tax rate on all crypto trading profits to replace the current system of variable taxation. Meanwhile, the FSA has expressed caution about allowing derivatives linked to foreign crypto asset ETFs, reportedly referring to such products as “not desirable.”

Sources:

https://www.fsa.go.jp/singi/singi_kinyu/angoshisanseido_wg/angoshisanseido_wg_index.html

https://cointelegraph.com/news/japan-rewrites-crypto-rules-investment-not-payment-tool

https://www.fsa.go.jp/singi/singi_kinyu/tosin/20251210/01.pdf

https://x.com/fsa_JAPAN/status/1998664638234583228