The Japanese cabinet has endorsed a draft amendment aimed at categorizing cryptocurrencies as financial products, signaling a significant change in the country's regulatory approach to the sector. This proposal seeks to bring cryptocurrency assets under the purview of the Financial Instruments and Exchange Act, a regulatory framework currently applied to stocks and other securities, as reported by Nikkei.
If the law is passed during the current parliamentary session, it could come into effect as early as the fiscal year 2027. Previously, Japan has primarily treated cryptocurrency as a payment method under the Payment Services Act, focusing on aspects such as custody, anti-money laundering checks, and exchange registration. The new regulations would outlaw insider trading and require issuers to publish disclosures on an annual basis. Additionally, penalties for operating without registration would increase, with potential prison sentences of up to 10 years, a rise from the current three years, and fines could reach 10 million yen, approximately $62,800.
The Securities and Exchange Surveillance Commission would also see its authority to monitor the market expanded. According to Minister for Financial Services Satsuki Katayama, this move is intended to enhance the supply of growth capital in response to shifts in financial and capital markets, ensuring fairness, transparency, and investor protection.