The Japanese government has approved a legislative amendment aimed at reclassifying cryptocurrencies as financial products, signaling a significant change in the country's regulatory approach to the sector. By bringing cryptocurrency assets under the Financial Instruments and Exchange Act, the same framework that governs stocks and securities, the proposal aligns crypto regulation more closely with that of traditional financial instruments, as reported by Nikkei. If enacted during the current parliamentary session, the new law could come into effect by fiscal year 2027.
Previously, Japan regulated cryptocurrency primarily as a payment method under the Payment Services Act, focusing on aspects such as custody, anti-money laundering, and exchange registration. The proposed rules would introduce a ban on insider trading and require issuers to publish annual disclosures, thereby enhancing transparency.
Additionally, penalties for operating without proper registration would increase significantly, with potential prison sentences of up to 10 years and fines of up to 10 million yen. The Securities and Exchange Surveillance Commission would also be granted broader powers to monitor and regulate the market. According to Minister for Financial Services Satsuki Katayama, this move is intended to 'increase the supply of growth capital in response to changes in financial and capital markets, ensuring fairness, transparency, and investor protection'.