Japan is advancing a round of cryptocurrency regulatory reforms. The House of Representatives has passed related legislation to shift the regulatory foundation for crypto assets from the Payment Services Act to the Financial Instruments and Exchange Act. This means Japan will increasingly treat crypto assets like investment products such as stocks, rather than primarily viewing them as payment tools.
Regulatory framework shifts toward financial instruments
The Financial Services Agency of Japan stated that one of the reasons for promoting legislative amendments is that crypto assets have become more widely integrated into the investment market. Official data cited shows that Japan currently has over 14 million crypto accounts, with a significant proportion belonging to domestic retail users with middle to low incomes—approximately 70% of these accounts are held by individuals with annual incomes below 7 million yen.
Under the bill, crypto assets will be classified as financial instruments and subject to trading rules closer to those of the securities market. The report notes that the new regulations are expected to take effect in 2027. The bill also paves the way for Japan to launch crypto ETFs, with the ruling Liberal Democratic Party previously stating that such products could offer a more accessible investment approach.
Taxation and trading rules are being tightened simultaneously.
A key change in the new framework is that crypto assets are expected to be subject to lower tax rates. At the same time, trading rules will be significantly tightened. Japan will introduce insider trading prohibitions, similar to those in the stock market, into the crypto market.
Insiders such as project team members or exchange employees who possess material non-public information must not trade the related tokens. Material information includes plans to list or delist a token, deterioration in company operations, or large transactions that could significantly impact the market.
Unaudited token issuance with investment limits
The bill also proposes stricter disclosure requirements to prevent project teams from providing misleading information to the market. Project teams must disclose key details such as technical operations, token supply, and business finances.
If a company raises funds through tokens without obtaining an independent audit from an accounting firm, the investment amount for retail investors will be limited to no more than 2 million JPY. This measure aims to raise the funding threshold for unaudited projects and reduce retail investors' exposure to risk.
Penalties for operating without a license have been significantly increased.
On the enforcement side, Japan is also preparing to significantly increase penalties. The maximum prison term for operating unregistered cryptocurrency businesses will rise from three to ten years; the maximum fine will be increased to 10 million yen. Japan’s securities regulator will also gain clearer authority to conduct criminal investigations and may apply to courts to freeze assets.