Japan Tightens Rules to Curb Crypto Insider Trading

As Japan grapples with the increasing integration of cryptocurrencies into its financial markets, regulators are preparing to introduce regulations aimed at combating insider trading in the digital asset space. 

Overview

On September 14 2025, Nikkei Asia announced that Japan’s Security and Exchange Surveillance Commission (SESC) would be authorised to investigate suspicious trading activity and hit violators with fines based on how much they profited from insider trading.

Under the proposed changes, crypto markets would be brought closer to the regulatory standards governing stocks and bonds, aiming to close loopholes and restore confidence among investors.

What the New Rules Would Do

Under current legislation, insider trading regulations in Japan—embedded in the Financial Instruments and Exchange Act (FIEA)—do not cover cryptocurrencies. The result is a regulatory blind spot: trades based on non-public information in the crypto world cannot be penalised under existing statutes.

To address this, the Financial Services Agency (FSA) is planning to amend the FIEA to explicitly extend insider trading prohibitions to crypto.  Once enacted, the SESC would gain authority to investigate suspicious crypto trades, impose fines tied to illicit profits, and refer serious cases for criminal prosecution. 

The proposed framework would allow regulators to clearly define what kinds of conduct qualify as insider trading in the crypto context—such as trading before a token listing or acting on undisclosed protocol vulnerabilities. Regulators hope to finalise the rules by the end of 2025 and submit them to the Diet in the next session. 

Why the Push, and the Challenges Ahead

Why the push?

Crypto adoption in Japan has surged in recent years. Active crypto accounts have multiplied, and digital assets increasingly interact with traditional finance. Many observers argue that allowing insider trading to go unchecked erodes trust and invites market abuse—particularly when a lack of oversight is contrasted with rules in stock markets.

The shift also aligns with broader regulatory reforms underway, such as proposals to reclassify crypto under the FIEA rather than the Payment Services Act. 

Challenges ahead

One major challenge is defining who qualifies as an

“insider”

in the crypto space. Many digital assets lack a central issuer or corporate entity, making it difficult to pinpoint individuals with privileged information.

Enforcement experience is also limited—Japan has few precedents for prosecuting crypto insider cases. Moreover, balancing innovation and regulation is delicate: overly broad rules could stifle legitimate crypto development, while weak rules may leave markets exposed to misconduct.

What It Could Mean for Investors and the Market

If the reforms succeed, they would bring crypto trading under a stricter regulatory regime akin to that applied to traditional financial instruments. For retail and institutional participants, that could mean:

• Greater transparency and fairness: With explicit prohibitions and enforcement, investors may feel more confident in market integrity.
• Higher compliance costs for exchanges and projects: Crypto platforms will need surveillance systems, risk control procedures, and legal frameworks to monitor for insider trades.
• Deterrent effect: The possibility of fines or criminal referrals could discourage sophisticated traders or insiders from exploiting undisclosed information.
• Unintended friction: If rules are overly rigid, they might hamper token launches, decentralised protocols, or novel financial products in the crypto space.

In effect, Japan’s proposal could set a regulatory benchmark in Asia: a hybrid model that seeks to preserve crypto innovation while ensuring that markets operate with fairness—and that actors using nonpublic information cannot profit with impunity.