The Japanese government has approved a proposed amendment to categorize cryptocurrencies as financial products, signaling a significant change in the country's regulatory approach to the sector. This move would bring cryptocurrency assets under the purview of the Financial Instruments and Exchange Act, a regulatory framework currently applied to stocks and other securities.
If the proposal is passed during the current parliamentary session, it could come into effect as early as the 2027 fiscal year. Previously, Japan regulated cryptocurrencies primarily as payment tools under the Payment Services Act, focusing on aspects such as custody, anti-money laundering checks, and exchange registration.
The new regulations would introduce a ban on insider trading and require issuers to publish annual disclosures. Additionally, penalties for operating without registration would increase, with potential prison sentences of up to 10 years and fines of up to 10 million yen, a significant rise from the current three-year imprisonment and lower fines.
The Securities and Exchange Surveillance Commission would also be granted broader powers to oversee the market. According to Minister for Financial Services Satsuki Katayama, this regulatory shift aims to increase the availability of growth capital in response to evolving financial and capital markets, ensuring fairness, transparency, and investor protection.