The Japanese cabinet has endorsed a proposed amendment aimed at reclassifying 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 proposal aligns crypto regulation more closely with that of traditional financial instruments. According to reports by Nikkei, if the proposal is approved during the current parliamentary session, it could come into effect as early as fiscal year 2027.
Previously, Japan has primarily viewed and regulated cryptocurrency as a payment method under the Payment Services Act, focusing on aspects such as custody, anti-money laundering, and exchange registration. The new rules would not only prohibit insider trading but also require issuers to publish disclosures on an annual basis.
Furthermore, penalties for operating without proper registration would increase, with potential prison sentences of up to 10 years and fines of up to 10 million yen, significantly higher than the current three-year imprisonment and lower fines. The Securities and Exchange Surveillance Commission would also see its authority expanded to better monitor and regulate the market. In a press conference, the Minister for Financial Services, Satsuki Katayama, emphasized that these changes are intended to 'broaden the availability of growth capital in response to evolving financial and capital markets, ensuring fairness, transparency, and investor protection.'