The Japanese cabinet has endorsed a proposed amendment aimed at categorizing cryptocurrencies as financial products, signaling a significant shift in the country's regulatory approach to the sector. By bringing cryptocurrency assets under the purview of the Financial Instruments and Exchange Act, which currently governs stocks and other securities, the proposed law could come into effect as early as 2027 if approved during the ongoing parliamentary session. Previously, Japan had primarily treated cryptocurrency as a payment method under the Payment Services Act, focusing on aspects such as custody, anti-money laundering, and exchange registration. The revised rules would introduce a ban on insider trading and require issuers to publish annual disclosures.
Additionally, penalties for operating without registration would increase, with potential prison sentences of up to 10 years and fines of up to 10 million yen, a significant rise from the current three years and associated fines. The Securities and Exchange Surveillance Commission would also be granted broader powers to oversee 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 in the market.'