Japan's cabinet has greenlit a draft amendment that aims to categorize cryptocurrencies as financial products, signifying a major change in the country's regulatory approach to the sector. By bringing crypto assets under the Financial Instruments and Exchange Act, the same framework that governs stocks and other securities, the proposal aligns crypto regulation more closely with traditional financial instruments, as reported by Nikkei. If approved during the current parliamentary session, the legislation could come into effect as early as fiscal year 2027. Previously, Japan regulated crypto 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 would introduce a ban on insider trading and require issuers to publish annual disclosures, enhancing transparency and regulatory oversight. Additionally, the 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, a substantial increase from the current three-year imprisonment and lower fines. The Securities and Exchange Surveillance Commission would also see its authority expanded to more effectively monitor and regulate the market.
According to Minister for Financial Services Satsuki Katayama, this move is designed 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'.