Japan's cabinet has endorsed a legislative amendment aimed at categorizing cryptocurrencies as financial products, signaling a significant shift in the nation's regulatory approach towards the sector. By bringing crypto assets under the purview of the Financial Instruments and Exchange Act, which currently governs stocks and other securities, the proposal aligns cryptocurrency regulation more closely with that of traditional financial instruments. This change, reported by Nikkei, could become effective as early as fiscal 2027 if approved during the current parliamentary session.
Previously, Japan regulated crypto primarily as a payment method under the Payment Services Act, focusing on aspects such as custody, anti-money laundering measures, and exchange registration. The proposed rules introduce a ban on insider trading and require issuers to publish annual disclosures, enhancing transparency and regulatory oversight.
Furthermore, penalties for operating without 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 imprisonment and lesser fines. The Securities and Exchange Surveillance Commission will 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 'enhance the availability of growth capital in response to evolving financial and capital markets, ensuring fairness, transparency, and investor protection.'