The Japanese government has taken a significant step towards regulating the cryptocurrency sector by approving a draft amendment that categorizes digital currencies as financial products. This move would bring cryptocurrencies under the purview of the Financial Instruments and Exchange Act, which currently governs stocks and other securities.
The proposed legislation, which may come into effect as early as 2027, marks a departure from Japan's previous approach of treating cryptocurrencies primarily as a means of payment under the Payment Services Act. The new rules would prohibit insider trading, require issuers to disclose information annually, and impose harsher penalties for non-compliance, including prison sentences of up to 10 years and fines of 10 million yen. The Securities and Exchange Surveillance Commission would be granted enhanced powers to monitor the market. According to Minister for Financial Services Satsuki Katayama, this regulatory shift aims to promote market fairness, transparency, and investor protection, while also increasing the availability of growth capital in response to evolving financial and capital markets.