Japan is on the verge of a significant shift in its regulatory approach to the cryptocurrency market. At a cabinet meeting on Friday, the government approved a bill classifying crypto assets as financial products. If final approval passes through parliament, the regulation is expected to come into effect by fiscal year 2027.
Currently, crypto assets in Japan are considered under the Payment Services Act and are largely treated as a payment method. However, with the new regulation, these assets will be included under the Financial Instruments and Exchange Act. Increased institutional interest and investment volume are among the key motivations behind this transformation.
Tighter oversight of crypto is coming
The new bill aims to strengthen investor protection and increase market transparency. In this context, insider trading will be explicitly prohibited. The goal is to prevent trading based on information not yet publicly available, and serious penalties will be imposed for such violations. Furthermore, crypto asset issuers will be required to disclose certain information to the public annually. This step aims to reduce information asymmetry in the market and enable investors to make healthier decisions.
Another notable aspect of the regulation is the increase in penalties. The maximum prison sentence for unregistered crypto platforms is being increased from three to ten years, while fines are also being significantly raised. In this context, the upper limit is planned to be increased from 3 million yen to 10 million yen. Authorities believe this tightening will increase market discipline and prevent unlicensed activities. Finance Minister Satsuki Katayama stated after a cabinet meeting that growth capital will be expanded to adapt to changes in financial and capital markets, while also ensuring market fairness and transparency.
On the other hand, Japan is also working on a broader set of policies supporting cryptocurrency. The fact that the tax rate applied to crypto income in the country can reach up to 55% has long been criticized. It is reported that the government is considering lowering this rate to 20%. In addition, the Japanese financial regulator's plans to consider crypto assets within the scope of exchange-traded funds (ETFs) are also noteworthy. This plan, which came to light in January, aims to recognize crypto assets as underlying assets for ETFs and launch these products by 2028. As is known, ETFs (exchange-traded funds) offer investors the opportunity to invest in crypto assets through exchange-traded funds without directly owning them. Large financial institutions such as Nomura and SBI are expected to take a leading role in this area.
