The Japanese cabinet has approved a draft amendment aimed at categorizing cryptocurrencies as financial products, signaling a significant change in the country's regulatory approach to the sector. By bringing crypto assets under the purview of the Financial Instruments and Exchange Act, which currently governs stocks and other securities, the proposal aligns cryptocurrency 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. Previously, Japan regulated crypto primarily as a payment method under the Payment Services Act, focusing on aspects such as custody, anti-money laundering checks, and exchange registration. The new rules would introduce a ban on insider trading and require issuers to publish annual disclosures, enhancing transparency and regulatory oversight.
Penalties for non-compliance would also increase, with unregistered operations potentially resulting in prison sentences of up to 10 years, a significant increase from the current three years, and fines could rise to 10 million yen. Furthermore, the Securities and Exchange Surveillance Commission would be granted broader powers to monitor and regulate the market. According to Minister for Financial Services Satsuki Katayama, this move 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.'