Japan’s government has approved an amendment to the Financial Instruments and Exchange Act (FIEA), aiming to classify crypto assets as financial products within its regulatory framework. The legislative update is positioned to strengthen oversight, enhance investor protection, and address concerns about fairness in the country’s growing digital asset market.
Expansion of regulatory oversight
The proposed changes mark a departure from Japan’s existing approach, where crypto assets had previously fallen under the Payment Services Act, categorizing them mainly as instruments for payment transactions. This shift responds to the increasing use of digital assets for investment, and will move primary regulation to the FIEA, which governs securities and derivatives activities.
If the law passes during the current parliamentary session, Japan could see the new framework go into effect as early as the 2027 fiscal year. The government’s focus is on adapting to recent developments in both domestic and international financial and capital markets.
The Financial Services Agency (FSA), tasked with financial regulation and consumer protection, will gain expanded authority with these amendments. The agency currently manages more than 13 million crypto accounts within its jurisdiction and regularly investigates complaints relating to fraudulent activity in the sector.
The amendment will also introduce annual disclosure obligations for crypto asset issuers. Companies working with digital assets will be subject to stricter transparency requirements to ensure accurate information is available for both investors and regulators.
Implications for industry participants
The new legislation brings harsher enforcement measures against unlicensed crypto operators. Penalties for operating without proper authorization will sharply increase, both in terms of prison sentences and financial fines. Maximum prison terms may extend significantly, while fines for violations are set to rise to higher thresholds.
Japan will prohibit trading of crypto assets based on undisclosed or non-public information. This provision explicitly addresses the risk of insider activity, aiming to deter unfair practices within digital asset markets, similar to restrictions already governing traditional financial products under the FIEA.
As part of the regulatory overhaul, registered businesses will also see a change in their official designation. “Crypto asset exchange operators” will be renamed “crypto asset trading operators,” reflecting the broader investment use cases for digital currencies in Japan.
Finance Minister Satsuki Katayama attended a cabinet briefing on the new bill. Katayama noted the government’s intention to balance innovation and growth in capital supply with strong protections for all participants in the market.
In response to changes in financial and capital markets, authorities plan to expand the supply of growth capital while ensuring market fairness, transparency, and investor protection, according to Finance Minister Satsuki Katayama.
The FSA had outlined plans for this regulatory transition in late 2025, and the current cabinet approval moves the proposal into the legislative process. If enacted, industry participants would have multiple years to adjust business practices and prepare for enforcement of the stricter regulatory landscape.
The Japanese Financial Services Agency, established in 2000, is the main government body overseeing banking, securities, and insurance services in the country. The FSA also supervises the broader adoption of digital assets and investigates issues related to fraud, aiming to boost transparency across the financial sector.
