Japan’s financial regulatory authority is preparing to amend the nation’s legislation to designate cryptocurrencies as financial products by as early as 2026, according to local reports.
The Financial Services Agency (FSA) intends to present a bill to parliament next year that aims to revise the Financial Instruments and Exchange Act, having already deliberated the proposed changes through internal study groups. While the specifics of the statute are still being developed, it is anticipated that cryptocurrencies will fall under insider trading regulations similar to those governing other financial assets, such as stocks, which prohibit trades based on non-public information.
That said, cryptocurrencies may be classified separately from traditional securities like stocks and bonds. If the proposal is enacted and cryptocurrency becomes governed by the financial regulations, companies dealing with crypto will be required to register with the FSA.
Additionally, the agency plans to enforce these new regulations irrespective of a company’s operational base, though the enforcement mechanisms against foreign entities remain uncertain. It’s also unclear which cryptocurrencies will be subject to regulation and how the distinction will be made between widely traded coins like Bitcoin and Ether and more speculative and high-risk tokens like memecoins.
These developments come amid a broader trend of supportive measures towards cryptocurrencies from Japan’s regulatory bodies and government.
Recently, the nation issued its first license to a firm for stablecoin transactions, granting it to SBI VC Trade, a subsidiary of the financial conglomerate SBI, which is set to support the use of USDC.
Moreover, the ruling Liberal Democratic Party is advancing reforms to lower the capital gains tax on cryptocurrencies from 55% to 20%, categorizing digital assets as a unique asset class. In February, reports indicated that the FSA is also considering lifting its ban on cryptocurrency-based exchange-traded funds (ETFs), in alignment with the policy direction of Hong Kong, which approved crypto ETFs for trading.