The Japanese government has approved amendments to the Financial Instruments and Exchange Act, formally recognizing crypto assets as financial instruments rather than simply a means of payment.

The update introduces stricter oversight, including a ban on insider trading and other activities based on undisclosed information, according to reports from Nikkei. It also requires cryptocurrency issuers to provide annual disclosures, increasing transparency across the sector.

Previously, Japan’s Financial Services Agency regulated crypto under the Payment and Settlement Act, focusing primarily on its use in payments. The revised classification reflects the growing role of institutional investors and aligns crypto more closely with traditional financial markets.

Stronger oversight and integration with traditional finance

The shift effectively moves crypto assets into the same regulatory category as equities, marking a transition from an experimental payment tool to a recognized financial instrument.

Japan’s Finance Minister Satsuki Katayama emphasized the broader objective behind the reform. “We will expand the supply of growth capital in response to changes in financial and capital markets, and ensure market fairness, transparency, and investor protection,” she said following a Cabinet meeting.

The amendment also increases penalties for unregistered crypto exchanges, reinforcing the country’s regulatory framework. Earlier signals of this direction emerged in January, when Katayama highlighted the importance of exchanges and infrastructure in ensuring that citizens benefit from blockchain-based assets.

In parallel, the government has supported plans to reduce taxation on crypto profits, proposing a flat rate of 20% to encourage participation and investment.

Path toward ETFs and broader adoption

Japan is also preparing for the introduction of crypto exchange-traded funds, with legalization targeted by 2028. This move is expected to further integrate digital assets into mainstream finance.

Major institutions such as Nomura Holdings and SBI Holdings are anticipated to be among the first to develop crypto-linked investment products, signaling growing institutional commitment to the sector.

Sources:

https://cointelegraph.com/news/japan-approves-bill-classify-cryptocurrencies-financial-instruments

https://www.nikkei.com/article/DGXZQOUB101480Q6A410C2000000/

https://x.com/WatanabeSota/status/2042472175438078057