Japan to Classify Cryptocurrencies as Financial Products

By: Isha Das

Japan's Financial Services Agency (FSA) is progressing towards a significant alteration in the regulation of cryptocurrencies, aiming to classify them as financial products. This decision, as reported by Nikkei, involves revising financial laws to encompass cryptocurrencies under insider trading rules by 2026. This regulatory overhaul reflects Japan’s strategic move to enhance the oversight and transparency of its burgeoning crypto market.

The FSA is preparing a legislative proposal to amend the Financial Instruments and Exchange Act. This amendment will integrate cryptocurrencies into the existing legal framework that currently governs traditional financial products like stocks. The forthcoming changes are expected to advance through Japan’s parliament following thorough evaluation by dedicated internal study groups.

The principal aim of this legislative update is to mitigate risks of unauthorized trading and insider activities within the crypto industry. By embedding cryptocurrencies within the bounds of financial product regulations, Japan seeks to reinforce investor protection, thereby encouraging a more robust and secure economic environment. Such a reclassification would align cryptocurrency exchanges with compliance standards akin to those followed by traditional securities exchanges.

This strategic decision coincides with global trends, as countries around the world wrestle with regulatory measures amid the rapid growth of digital assets. The move is seen as part of Japan’s broader efforts to maintain its position as a leader in financial technology regulation, providing clarity and certainty to market participants while ensuring the safekeeping of investors.