Josh Weiner
Japan’s Financial Services Agency (FSA) is considering reclassifying cryptocurrencies as financial products under revised regulations, aiming to tighten oversight and mitigate insider trading risks within the digital asset market, according to a report by Nikkei.
This initiative forms part of a broader regulatory effort to enhance transparency and investor protection in Japan’s rapidly expanding cryptocurrency sector, which has seen increasing adoption alongside a rise in fraudulent activities. The FSA is expected to propose amendments to the Financial Instruments and Exchange Act (FIEA) to Japan’s parliament by 2026, following an in-depth review conducted by financial and legal experts.
Currently, cryptocurrencies are categorized as a “means of settlement” under the Payment Services Act, a classification that primarily regulates their use as payment instruments rather than investment assets. However, this designation has resulted in regulatory gaps, particularly regarding market manipulation and insider trading practices.
The proposed reclassification would align cryptocurrencies more closely with traditional financial instruments, thereby subjecting them to stricter disclosure requirements and compliance standards. While specific details regarding insider trading regulations—such as the definition of insider information in the crypto context and corresponding penalties—have yet to be disclosed, the forthcoming legislative amendments are expected to provide further clarity.
As Japan continues to refine its regulatory approach to digital assets, the proposed changes could set a precedent for global financial markets seeking to establish more robust oversight of the cryptocurrency industry.
