The Japanese cabinet has endorsed a legislative amendment aimed at categorizing cryptocurrencies as financial products, signaling a significant change in the country's regulatory approach. By bringing cryptocurrency assets under the purview of the Financial Instruments and Exchange Act, the same framework that governs stocks and other securities, the proposal aligns crypto regulation more closely with that of traditional financial instruments. According to reports by Nikkei, if this legislation is passed during the current parliamentary session, it could come into effect as early as the 2027 fiscal year. Previously, Japan's regulatory framework treated cryptocurrency primarily as a form of payment, governed by the Payment Services Act, with a focus on aspects such as custody, anti-money laundering measures, and exchange registration.
The new rules would not only prohibit insider trading but also require issuers to make annual disclosures, enhancing transparency. Furthermore, the penalties for operating without proper registration would be significantly increased, with potential prison sentences of up to 10 years and fines of up to 10 million yen, representing a substantial escalation from the current three-year prison term. The Securities and Exchange Surveillance Commission would also see its authority expanded to more effectively oversee the market.
Minister for Financial Services Satsuki Katayama emphasized that this regulatory shift is intended to 'expand the supply of growth capital in response to changes in the financial and capital markets, ensuring market fairness, transparency, and the protection of investors.'