The Japanese cabinet has endorsed a proposed amendment to categorize cryptocurrencies as financial products, signaling a significant change in the country's regulatory approach to the sector. By bringing crypto assets under the purview of the Financial Instruments and Exchange Act, which currently governs stocks and other securities, the new law aims to enhance regulatory oversight.
If approved during the current parliamentary session, the legislation could come into effect by fiscal 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 revised rules would introduce a ban on insider trading and require issuers to publish annual financial 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.
The Securities and Exchange Surveillance Commission would also be granted 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 growth capital in response to evolving financial and capital markets, ensuring fairness, transparency, and investor protection'.