Japan is preparing new regulations to categorically prohibit insider trading in the cryptocurrency market. According to Nikkei, the financial authority plans to empower the regulatory body to impose fines proportional to the profits made from violations and refer severe cases for judicial proceedings, similar to the regime in the securities markets. The proposed framework aims to bring cryptocurrency under the Financial Instruments and Exchange Act (FIEA) and establish a strong institutional foundation for oversight. The establishment of principles is expected to be completed by the end of 2025, with legislation proposed in 2026.
Scope of the Draft and Enforcement Architecture
The draft involves explicitly prohibiting trading based on non-public information related to cryptocurrencies. The Securities and Exchange Surveillance Commission (SESC), known for its securities oversight, will investigate suspicious transactions and propose surcharges calculated on illicit gains. In severe violations, the SESC may forward cases for penal investigation. The limited scope of self-regulatory oversight by JVCEA necessitated a centralized enforcement architecture.
The draft addresses the legislative gap in the public definition. Initially, insider trading prohibitions for cryptocurrencies will be clearly defined, followed by secondary regulations detailing application specifics. Transitioning cryptocurrency under the FIEA will align it with traditional financial products in terms of information disclosure and market manipulation standards. Reports indicate that the Financial Services Agency (FSA) targets submitting the legislative changes to parliament in 2026.
Timeline in Motion
The delegation of authority and definitional clarity aim to deter sharp price swings triggered by pre-listing leaks. The challenge of “issuer uncertainty,” particularly relevant to decentralized tokens, highlights discussions on defining who qualifies as “insiders,” a topic for expert working groups. The aim is to establish active public oversight replacing controls confined to internal exchange protocols.
This regulatory move holds potential to enhance institutional trust in Japan’s cryptocurrency market, where user numbers have surged over the last five years. Considering market infrastructure and the tax framework together, disciplining market manipulation risk may lead to enhanced transparency in exchange operations, equal access to information, and a rise in investor protection benchmarks. As the timeline becomes clearer, local exchanges are expected to intensify their compliance investments and refine internal control sets in listing processes.
