Regulators in Japan aim to tackle insider trading, potentially granting legal status to crypto assets
Japan is making strides towards recognizing cryptocurrencies as legal assets by amending the Financial Instruments and Exchange Act to incorporate them as financial products. The Financial Services Agency (FSA) is spearheading this effort to support the growth of the crypto industry while ensuring stringent regulatory supervision. At the same time, combating insider trading associated with cryptocurrencies is a key focus for regulators.
The FSA is currently in the process of evaluating the existing regulatory frameworks in Japan that may require adjustments to accommodate cryptocurrencies. This review process, which involves industry experts, is expected to be concluded by 2026. Subsequently, the reformed bill will be presented to the parliament for deliberation and approval. Once cryptocurrencies are officially classified as “financial products,” all entities engaging in crypto-related investments must register with the financial authorities, a requirement already in place for crypto exchanges in Japan.
Recent reports have highlighted the growth of crypto-related money laundering and scams in Japan, prompting regulatory bodies to tighten oversight on local crypto service providers. In response to rising instances of fraud and cybercrime, Japanese authorities are considering establishing a distinct category for crypto assets within the regulatory framework, separate from traditional securities like stocks and bonds. While specific details about the proposed amendment are yet to be disclosed, it is anticipated that regulations to prevent insider trading in the crypto sector will mirror those governing conventional financial instruments.
Japan’s approach to regulating cryptocurrencies reflects its gradual and cautious stance towards this burgeoning industry. In an effort to strike a balance between fostering innovation and ensuring investor protection, the FSA reduced tax rates on cryptocurrency earnings for individual investors in 2024. This move aimed to incentivize small-scale investors by allowing them to retain more of their profits. The FSA also revised tax rates for corporate and retail investors in the FY 2025 tax regime, setting flat rates of 30% and 20% respectively.
Furthermore, Japanese cryptocurrency exchanges are required to register with the FSA and comply with Anti Money Laundering/Countering the Financing of Terrorism (AML/CFT) laws, indicating the government’s commitment to combating financial crimes in the crypto space.
As Japan navigates the complexities of regulating cryptocurrencies, the country is taking measured steps to adapt its regulatory framework to this evolving landscape, embracing innovation while safeguarding investor interests. Stay tuned for further updates on Japan’s crypto regulatory developments as the industry continues to mature and evolve.