The Japanese cabinet has endorsed a draft amendment aimed at categorizing cryptocurrencies as financial products, signaling a significant change in the country's approach to regulating the industry. By bringing cryptocurrency assets under the purview of the Financial Instruments and Exchange Act, which currently governs stocks and other securities, the proposal aligns crypto regulation more closely with that of traditional financial instruments, as reported by Nikkei. If the law is passed during the current parliamentary session, it could come into effect as early as fiscal year 2027. Until now, Japan has primarily viewed crypto as a means of payment, regulated under the Payment Services Act, focusing on aspects such as custody, anti-money laundering measures, and exchange registration.
The new rules would prohibit insider trading and require issuers to publish annual financial disclosures. Additionally, penalties for operating without proper registration would increase, with potential prison sentences of up to 10 years and fines of up to 10 million yen, significantly higher than the current three-year imprisonment and lower fines. The Securities and Exchange Surveillance Commission would also be granted broader powers to oversee and regulate the market. According to Minister for Financial Services Satsuki Katayama, this move is intended to 'increase the supply of capital for growth in response to changes in financial and capital markets, ensuring fairness, transparency, and the protection of investors in the market'.