The Japanese government has approved a proposed amendment to categorize cryptocurrencies as financial products, signaling a significant change in the country's regulatory approach to the sector. By bringing crypto assets under the Financial Instruments and Exchange Act, which currently governs stocks and other securities, the proposal aligns cryptocurrency regulation with that of traditional financial instruments.
If enacted during the current parliamentary session, the new law could be implemented as early as the 2027 fiscal year. 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 new rules introduce stricter measures, including a ban on insider trading and a requirement for issuers to publish annual reports. Penalties for operating without registration will increase, with potential prison sentences of up to 10 years and fines of up to 10 million yen, a significant increase from the current three-year imprisonment and lower fines.
The Securities and Exchange Surveillance Commission will also be granted enhanced powers to oversee the market. According to Minister for Financial Services Satsuki Katayama, this regulatory shift aims to 'increase the availability of growth capital in response to changes in financial and capital markets, ensuring fairness, transparency, and investor protection in the market'.