Japan Plans to Reclassify Cryptocurrencies as Financial Products

TLDR:

Table of Contents

Japan’s Financial Services Agency (FSA) plans to reclassify cryptocurrencies as financial products instead of “means of settlement”
The change aims to curb insider trading in the crypto market
Amendments to the Financial Instruments and Exchange Act could be submitted to parliament as early as 2026
This is part of broader efforts to strengthen oversight of Japan’s growing crypto ecosystem
The change would likely place cryptocurrencies under insider trading laws similar to stocks

Regulatory Shift

Japan is getting ready to make a big change in how it treats cryptocurrencies. The country’s Financial Services Agency (FSA) plans to reclassify digital currencies as financial products. This would be a major shift from their current status as a “means of settlement” under the Payment Services Act.

The proposed change was reported by Nikkei on March 30, 2025. According to the report, the FSA intends to submit amendments to the Financial Instruments and Exchange Act (FIEA) to Japan’s parliament. This could happen as early as 2026.

The main goal of this reclassification is to curb insider trading in the crypto market. Under current rules, cryptocurrencies aren’t subject to the same insider trading laws that apply to stocks and other securities. This has created gaps in regulatory oversight.

Closing Regulatory Gaps

The FSA has been studying these changes through internal working groups. The details are still being worked out, but the change would likely put cryptocurrencies under insider trading laws. These laws currently apply to other financial products like stocks.

It’s worth noting that cryptocurrencies would probably be put in a separate category from securities such as stocks and bonds. The exact definition of what makes up “insider information” in the crypto world hasn’t been spelled out yet. Penalties for violations also remain unclear.

If these changes go through, companies offering crypto services would need to register with the FSA. The regulator plans to enforce the new rules for all companies, even those outside Japan. However, it’s not clear how they would enforce these laws against foreign companies.

Another open question is which cryptocurrencies would fall under the new rules. The report doesn’t clarify how the FSA would handle widely traded assets like Bitcoin and Ethereum compared to more risky tokens like memecoins.

Part of a Pro-Crypto Trend

This planned reclassification comes during a wave of pro-crypto moves by Japanese regulators. Earlier this month, Japan issued its first license allowing a company to deal with stablecoins. This license went to SBI VC Trade, which is preparing to support Circle’s USDC stablecoin.

Japan’s ruling Liberal Democratic Party has also moved forward with plans to reduce the capital gains tax on crypto. They want to cut it from 55% to 20% and classify digital assets as a distinct asset class.

In February, reports said the FSA was looking to lift a ban on crypto-based exchange-traded funds (ETFs). This would align Japan’s policy with Hong Kong, which approved crypto ETFs for trading in April 2024.

The move to reclassify cryptocurrencies comes as Japan has seen increased adoption of digital assets. Unfortunately, this growth has been accompanied by a rise in fraudulent activities in the crypto space. The new rules aim to provide better protection for investors.

The FSA’s review has been conducted by experts behind closed doors. The goal is to create a more robust framework that addresses the reality of how cryptocurrencies are being used today. While they were originally seen mainly as payment tools, they’re now widely used as investment vehicles.

Japan has been working to find the right balance between encouraging innovation in the crypto sector and protecting consumers. The country was one of the first major economies to create a legal framework for cryptocurrencies back in 2017.

The FSA headquarters is located in central Tokyo, just across from the Ministry of Finance. From this location, they’re planning what could be the most important crypto regulatory change in Japan since the initial framework was established.

If implemented, these new rules would bring Japan’s regulatory approach more in line with those of other major financial centers. Many countries are strengthening their oversight of digital assets as the market matures.

The timeline suggests that these changes won’t happen overnight. With submission to parliament planned for 2026, implementation would likely follow sometime after that. This gives the market time to prepare for the new regulatory environment.

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