Japan Approves Major Crypto Regulatory Reform

Japan is preparing to significantly reshape its cryptocurrency market after parliament approved revisions that classify crypto assets as financial assets under the country's Financial Instruments and Exchange Act (FIEA), according to local news agency Nikkei.

The new framework shifts crypto regulation away from the Payment Services Act (PSA), which previously treated digital assets mainly as payment instruments. Instead, it introduces a regulatory model more closely aligned with traditional financial markets, including insider trading rules and enhanced oversight of crypto businesses. The reforms represent one of Japan’s most significant digital asset policy changes as regulators worldwide continue integrating crypto into existing financial systems.

Crypto companies face stricter compliance

Under the revised legislation, cryptocurrency businesses operating in Japan will be subject to tougher compliance requirements aimed at strengthening market integrity and improving investor protection. The new rules prohibit issuers, exchanges and other market participants from trading while in possession of undisclosed material information, effectively introducing insider trading restrictions similar to those that apply in traditional financial markets.

The reforms also significantly increase penalties for unregistered crypto businesses. The maximum prison sentence reportedly rises from three years to 10 years, while fines increase from approximately 3 million yen ($19,000) to around 10 million yen. Individuals found guilty of insider trading could face up to five years in prison, fines of up to 5 million yen, or both.

Japan aligns crypto with traditional finance

As part of the overhaul, the revised law also changes the official terminology for licensed businesses from "cryptocurrency exchange" to "cryptocurrency trading company," reflecting regulators' view of the sector as an increasingly integrated part of the broader financial system. Japan’s reforms mirror a wider global trend of applying existing financial regulations to digital assets rather than treating cryptocurrencies as a separate asset class.

Similar developments are taking place elsewhere. Earlier this month, South Africa’s tax authority released draft guidance explaining how existing tax laws apply to crypto assets, while regulators in the United States continue clarifying how current securities and commodities laws should be applied to the digital asset industry.

Sources:

https://cointelegraph.com/news/japan-crypto-amendment-digital-assets-financial-rules

https://www.nikkei.com/article/DGXZQOUB147UL0U6A710C2000000

https://x.com/ReutersLegal/status/2077308485558026275