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Japan’s parliament has passed amendments moving crypto asset regulation from the Payment Services Act into the Financial Instruments and Exchange Act.
The overhaul classifies crypto as a financial product separate from securities such as stocks and bonds. It introduces disclosure duties, insider trading restrictions and stronger enforcement against unregistered operators. Most rules are expected to take effect within one year of promulgation.
Exchanges Face Tougher Licensing and Custody Rules
Registered crypto exchanges will become crypto asset trading businesses and face rules closer to those for major financial instruments firms. Existing safeguards, including cold-wallet custody requirements, will remain in place under the new law.
The framework will require firms to review listed assets, assess customer suitability and monitor trading activity.
Platforms must also build compensation reserves for customer losses caused by unauthorized asset outflows. Companies providing critical custody or wallet systems will face notification and security requirements.
Unregistered Operators Face 10-Year Prison Risk
Penalties for operating an unregistered crypto business will rise from a maximum of three years in prison to 10 years.
The Securities and Exchange Surveillance Commission will gain authority to investigate criminal violations and seek emergency court orders against unauthorized operators.
The tougher enforcement powers are meant to bring crypto businesses closer to Japan’s financial-market supervision regime.
Issuers Must Disclose Supply, Technology and Finances
Issuers conducting public sales of designated crypto assets covered by the new disclosure regime will need to publish information on token functions, supply, underlying technology, business operations and financial condition.
Exchanges listing assets without an issuer-led offering will carry the disclosure responsibility themselves. Issuers must also publish updates after material events and provide annual information in certain cases.
Retail investment limits will apply when a token fundraising campaign has not received an independent financial audit, while professional investors will be exempt from those caps.
Insider Trading Ban Covers Listings and Token Sales
The law prohibits insiders from trading before material information becomes public.
Covered events include an exchange’s decision to list or delist a token, an issuer’s dissolution and planned transactions involving a large share of a token’s supply.
The rules give Japan a clearer framework for policing market abuse in crypto markets.
Tax and ETF Changes Still Need Separate Steps
The overhaul is expected to support later tax changes that could place qualifying crypto gains under separate taxation at roughly 20%, replacing rates that can reach 55%.
That tax treatment is not immediate and is expected to follow implementation of the financial rules, potentially from January 2028. Spot crypto exchange-traded funds will still require separate regulatory approval.
