The Japanese cabinet has given its approval to a proposed amendment that aims to categorize cryptocurrencies as financial products, signaling a significant shift in the country's approach to regulating this sector. By bringing cryptocurrency assets under the purview of the Financial Instruments and Exchange Act - the same framework that governs stocks and other securities, as reported by Nikkei - the proposal marks a considerable change from the current treatment of crypto primarily as a payment method under the Payment Services Act. This previous approach focused mainly on aspects such as custody, anti-money laundering checks, and the registration of exchanges.
If this proposal is passed during the current parliamentary session, it could become effective as early as the fiscal year 2027. The new rules are designed to ban insider trading and require issuers to publish annual disclosures, enhancing transparency and regulatory oversight.
Furthermore, penalties for operating without proper registration are set to increase, with potential prison sentences of up to 10 years and fines that could reach 10 million yen, significantly higher than the current three-year prison term and lower fines. The Securities and Exchange Surveillance Commission is also slated to receive broader powers to monitor and regulate the market. According to Minister for Financial Services Satsuki Katayama, this move is intended to 'increase the availability of capital for growth in response to the evolving financial and capital markets, ensuring fairness, transparency, and the protection of investors in the market'.