Japan's government has approved a proposed amendment to classify cryptocurrencies as financial products, signaling a significant shift in the country's regulatory approach to the sector. By bringing cryptocurrencies under the Financial Instruments and Exchange Act, the same framework that governs stocks and securities, the proposal aims to enhance oversight and transparency. According to reports by Nikkei, if the amendment is passed during the current parliamentary session, it could come into effect as early as fiscal year 2027.
Previously, Japan regulated cryptocurrencies primarily as payment tools under the Payment Services Act, focusing on aspects such as custody and anti-money laundering checks. The new regulations would introduce stricter rules, including the prohibition of insider trading and the requirement for issuers to publish annual disclosures. Additionally, penalties for operating without registration would 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 prison term. The move is intended to promote market fairness, transparency, and investor protection, as stated by Minister for Financial Services Satsuki Katayama, who emphasized the importance of adapting to changes in financial and capital markets to ensure the supply of growth capital.