Japan backs bill to bring crypto under financial product rules

Japan’s cabinet has approved a bill that would treat crypto assets as financial products under the Financial Instruments and Exchange Act, moving them out of the legal framework that has mainly handled them as a means of payment. The change would bring spot crypto further into Japan’s securities-style market rules, with insider trading at the centre of the rewrite.

The shift matters because it moves Japan’s crypto market closer to the same regulatory approach used for investment products. The Financial Services Agency’s working group said crypto is now increasingly seen as an investment target and called for rules focused on market fairness, information gaps, and stronger user protection.

The bill would move crypto out of payments law

The FSA’s reform plan says the main law governing crypto should change from the Payment Services Act to the Financial Instruments and Exchange Act. Under that approach, crypto assets would be classified as financial instruments separate from securities, instead of remaining under a payments framework that regulators now see as too limited for how the market is being used.

The shift is part of a wider package that the working group set out in late 2025. Alongside the legal reclassification, the report called for disclosure and information rules for issuers and crypto-asset exchange service providers, tighter controls on unregistered operators, stronger cyber requirements, and oversight of crypto-related advisory and investment services.

Insider trading is the immediate market focus

The headline issue is insider trading. Japan’s FSA said the current Financial Instruments and Exchange Act does not directly regulate insider trading in crypto, even though other anti-fraud and market manipulation rules already apply in parts of the market. The working group recommended creating insider trading rules for crypto to bring the market more in line with international practice and support fairer trading.

It also proposed giving the Securities and Exchange Surveillance Commission criminal investigative authority and an administrative monetary penalty framework for crypto market abuse. That would give regulators a more direct enforcement route than the current patchwork system.

The next step is the parliament

Cabinet approval does not complete the rewrite. The bill still needs to pass the Diet before the new framework can take effect. Reports on Friday said the legislation could come into force as early as 2027 if parliament approves it. For exchanges, issuers, and trading firms, the direction is clear. Japan is no longer treating crypto mainly as a payment tool. It is preparing to regulate it as an investment market that needs disclosure, surveillance, and market abuse rules to match.