Japan’s financial authorities are preparing a major overhaul of the cryptocurrency market. According to Nikkei Asia, the country’s Financial Services Agency (FSA) is drafting an amendment that would, for the first time, explicitly ban insider trading — the buying or selling of assets based on confidential, non-public information that could affect their price. The goal is to strengthen oversight of the rapidly growing market and align its legal framework with that of traditional financial instruments.

Insider trading in crypto not yet regulated

The current Financial Instruments and Exchange Act does not address insider trading in relation to cryptocurrencies. Oversight of suspicious transactions is therefore largely handled by crypto exchanges and industry associations operating under their own internal rules.

That is about to change. The FSA plans to finalize the draft by the end of this year and submit it to parliament during the next regular session. The new rules would prohibit trading based on non-public information — similar to existing regulations for stocks and bonds. Violations would carry financial penalties proportional to illegal profits and, in serious cases, criminal liability. Investigations will fall under the authority of Japan’s Securities and Exchange Surveillance Commission.

The regulatory challenge: who counts as an insider in crypto?

While it’s clear who has access to confidential information in traditional finance (such as company executives or shareholders), the situation is far murkier in the world of cryptocurrencies. Many tokens lack a clearly identifiable issuer, making it difficult to determine who should be considered an “insider.” Defining this concept is currently one of the key legal challenges for the FSA.

Stronger oversight amid crypto’s growing ties to traditional finance

Japanese regulators have recently stepped up their scrutiny of the crypto sector, driven by its increasing integration with the traditional financial system. A recent example is the announcement by Binance Japan, which entered a capital and business partnership with payment giant PayPay Corporation. PayPay acquired a 40% stake in the local crypto exchange — a sign that cryptocurrencies are becoming part of Japan’s mainstream financial world, prompting calls for stricter oversight.

Sources:

https://asia.nikkei.com/spotlight/cryptocurrencies/japan-to-ban-cryptocurrency-insider-trading-with-new-rules

https://www.theblock.co/post/373957/paypay-acquires-40-stake-in-binance-japan