Japan’s Crypto Crackdown: New Laws to Hit Insider Trading

Japan’s Financial Services Agency (FSA) is preparing stricter regulations for cryptocurrencies, with plans to classify them as financial products. New regulations will be implemented under the compliance rules to stop insider trading according to predictions.

The Financial Services Agency plans to modify the Financial Instruments and Exchange Act to update how they categorize cryptocurrency assets. Bitcoin alongside other digital assets receives Payment Services Act regulation which defines them as settlement instruments. Under the new regulatory framework cryptocurrencies would become similar to traditional financial securities.

Reports from Nikkei indicate parliament will receive the bill no later than 2026. The proposed rules would require crypto investment promotion businesses to register with regulatory authorities thereby expanding their oversight capabilities past exchanges. Public authorities now face increasing numbers of complaints from investors who say they were tricked into buying cryptocurrencies.

Stricter Regulations Target Insider Trading and Fraud

Japan has seen a rise in cryptocurrency trading, with active accounts surpassing 7.1 million in 2024, more than triple the number from five years ago. The rise in trading volume has led regulatory agencies to intensify their scrutiny of market fraud alongside potential manipulation schemes.

The FSA is also looking to strengthen enforcement mechanisms, including stricter oversight of companies operating outside Japan. While details on enforcement remain unclear, authorities may impose compliance requirements on foreign firms offering crypto-related services to Japanese investors.

Japan Moves Forward with Crypto Law Amendments

Earlier in March, Japan’s Cabinet approved a proposal to amend the Payment Services Act. The amendment aims to ease regulations for stablecoins and crypto brokerage firms, potentially making it easier for businesses to enter the Japanese market.

The bill has already passed through the FSA and was submitted to the National Diet, Japan’s legislative body. Upon receiving approval from the House of Representatives and House of Councillors the bill will be sent to the Emperor who will promulgate it before becoming a law. The legislative process requires every amendment to receive debate together with possible changes prior to final approval.

Changes to Stablecoin Regulations and Brokerage Licensing

New stablecoin regulations make up a part of the proposed amendment. Currently, stablecoin issuers in Japan must hold an equivalent amount of cash deposits in regulated banks. The regulation permits issuers to utilize bonds and fixed-term deposits as collateral by establishing a 50% restriction on these assets.

The legislation creates an independent category for crypto intermediaries which encompasses brokerages among other businesses. Currently, brokerage firms in Japan must meet the same registration requirements as crypto exchanges. A modified classification scheme will establish better parameters for companies working in this domain.

As Japan tightens regulations on crypto trading and expands oversight on stablecoins, market participants are closely monitoring developments that could reshape the country’s digital asset landscape.