The Japanese government has approved a draft bill that aims to categorize cryptocurrencies as financial products, signaling a significant change in the country's regulatory approach to the industry. 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. If enacted during the current legislative session, the new law could become effective as early as the 2027 fiscal year. Previously, Japan regulated crypto primarily as a means of payment under the Payment Services Act, focusing on aspects such as custody, anti-money laundering, and exchange registration.
The proposed legislation introduces stricter rules, including the prohibition of insider trading and the requirement for issuers to disclose information annually. Furthermore, penalties for operating without proper registration will increase, with potential prison sentences of up to 10 years and fines of up to 10 million yen, representing a significant escalation from the current three-year prison term. The Securities and Exchange Surveillance Commission will also be granted broader powers to oversee and enforce compliance within the market. According to Minister for Financial Services Satsuki Katayama, this regulatory shift is intended to 'enhance the availability of growth capital in response to evolving financial and capital markets, ensuring fairness, transparency, and investor protection'.