Japan’s cabinet has approved a major regulatory shift that reclassifies crypto assets away from payments law and into securities-style regulation — a move that could reshape how exchanges, issuers and traders operate. What changed - The government-backed bill moves crypto out of the Payment Services Act and into the Financial Instruments and Exchange Act (FIEA). Crypto would be treated as a type of financial instrument (distinct from traditional securities) rather than primarily as a means of payment. - The proposal is part of a broader package the Financial Services Agency (FSA) working group published in late 2025 that treats crypto increasingly as an investment target and focuses on market fairness, information gaps and stronger user protections. Key elements of the reform - New disclosure and information rules for crypto issuers and crypto-asset exchange service providers. - Tighter controls on unregistered operators and expanded oversight of crypto-related advisory and investment services. - Stronger cybersecurity requirements for market participants. - A push to align Japan’s crypto rules with international standards for investment products and market conduct. Insider trading and enforcement at the centre - The working group highlighted insider trading as the immediate market gap: the current FIEA does not directly cover insider trading in crypto, even though some anti-fraud and anti-manipulation provisions already apply. - To close that gap, the reform would create explicit insider trading rules for crypto, and recommend giving the Securities and Exchange Surveillance Commission (SESC) criminal investigative powers plus an administrative monetary-penalty framework tailored to crypto market abuse. That would provide regulators a clearer, more direct enforcement route than the current patchwork. What comes next - Cabinet approval is only the first step — the bill must still pass the Diet. If approved, reports say the new framework could take effect as early as 2027. - For exchanges, issuers and trading firms, the intent is now clear: Japan is shifting from treating crypto mainly as a payment tool toward regulating it as an investment market that requires disclosure, surveillance and market-abuse rules. Why it matters - The change signals Japan’s intent to bring crypto into mainstream capital-market regulation, prioritizing investor protection and market integrity as crypto adoption matures. Watch the parliamentary debate, the final text of the law, and subsequent rulemaking for the exact compliance requirements and timelines. Read more AI-generated news on: undefined/news