In a significant regulatory shift, Japan's cabinet has approved a proposed amendment to categorize cryptocurrencies as financial products. This move would bring digital assets under the purview of the Financial Instruments and Exchange Act, the same framework that governs stocks and other securities.
The legislation, which could come into effect as early as 2027 if passed during the current parliamentary session, marks a departure from Japan's previous approach to crypto, which was primarily viewed as a payment method under the Payment Services Act. The focus was previously on aspects such as custody, anti-money laundering measures, and exchange registration. Under the new rules, insider trading would be prohibited, and issuers would be required to publish annual disclosures. Additionally, penalties for operating without proper registration would increase, with potential prison terms of up to 10 years and fines of up to 10 million yen.
The Securities and Exchange Surveillance Commission would also see its authority expanded to better regulate the market. According to Minister for Financial Services Satsuki Katayama, this move is intended to enhance market fairness, transparency, and investor protection, while also facilitating the supply of growth capital in response to evolving financial and capital markets.