Japan’s Regulatory Shift: Tightening Cryptocurrency Trading Rules
Japan is taking significant strides to strengthen its regulatory framework surrounding cryptocurrency trading. The country’s financial authorities are proposing robust measures to prohibit buying or selling digital tokens based on undisclosed information, aiming to align crypto trading regulations with those governing traditional securities.
Proposed Reclassification of Crypto Assets
According to reports from Nikkei, the Financial Services Agency (FSA) is contemplating reclassifying certain crypto assets under the Financial Instruments and Exchange Act. This reclassification would subject cryptocurrencies to the same insider trading regulations that currently apply to stocks and bonds, ensuring a more secure trading environment.
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Setting the Stage for Change
The FSA has outlined a preliminary timeline for implementing these changes. Meetings of a specialized government working group on cryptocurrency systems have been ongoing throughout the year. The minutes from these meetings suggest that the agency aims to finalize the details by the end of 2025, with the goal of introducing a legislative bill for amending relevant laws by 2026.
Should lawmakers approve the proposed legislation, the Securities And Exchange Surveillance Commission (SESC) would be empowered to investigate questionable crypto trades, impose penalties for illicit profits, and even pursue criminal prosecutions in severe cases. This shift would enable regulators to monitor crypto transactions with the same vigilance as securities trades, tracking unusual profit patterns and enforcing fines as necessary.
Motivations Behind Regulatory Push
Japan’s rapid growth in cryptocurrency users, reaching approximately 12.4 million by May 2025, has heightened the need for robust regulatory oversight. Current regulations under the Payment Services Act are perceived as insufficient for addressing insider trading-like abuses, prompting the push for stricter controls to ensure market fairness and protect everyday investors.
Challenges in Monitoring Crypto Trades
Unlike corporations with identifiable executives and board members, many digital tokens lack a single, clear issuer. This presents a challenge for regulators in determining who qualifies as an “insider” for a particular token. Moreover, tracking trades across various wallets and proving that a trader acted on non-public information are complex tasks. Although blockchain records are publicly accessible, identifying the individuals behind specific addresses often requires traditional investigative methods.
Experts emphasize the need for regulators to establish clear guidelines on what constitutes “material” information and how to trace profits from suspicious trades before penalties can be administered.
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