Japan to implement crypto insider trading restrictions
According to a report published on March 31 by Nikkei, a Tokyo-based financial news outlet, the Japanese authorities are gearing up to categorize digital assets as financial products, while in the process broadening the scope of insider trading restrictions.
While the publication didn’t cite a particular source, it reported that the Japanese Financial Services Agency (FSA) is expected to file a draft amendment related to the existing Financial Instruments and Exchange Act in 2026.
From payment to investment product
Currently, Japan’s Payment Services Act categorizes crypto assets as a means of settlement. That categorization looks at these assets from the perspective of a payment tool rather than considering them as investment products.
The move is understood to be part of a broader effort to copper-fasten crypto sector oversight. Earlier this month, the Japanese cabinet approved a proposal that seeks to amend the Payment Services Act.
At the time, it had been suggested that the amendment would look to exclude crypto assets from being classified as securities, while also bringing about a reduction in the capital gains tax rate as it is applied to digital assets. It’s likely that crypto assets will find themselves in a distinct category, apart from securities like stocks and bonds.
Crypto adoption
Activity related to crypto assets has been growing in Japan. 7.34 million active accounts were found to be responsible for crypto transactions in Japan in January. That amounts to a tripling in such crypto transaction activity over the course of five years.
Japan enjoyed greater adoption at a very early stage in the global development of crypto. However, following the Mt. Gox crypto exchange collapse in 2014, which at the time accounted for the loss of 7% of Bitcoin’s supply, regulators responded by clamping down on the sector.
That situation led to greater investor protection for Japanese investors but it presented as a difficulty for Japan-based exchanges to compete globally with other exchange businesses overseas. A conservative stance taken by the FSA has also held back crypto exchange-traded fund (ETF) approval and adoption.
Bitcoin ETFs were approved in the United States over a year ago. Earlier this month, Astar Network founder Sota Watanabe outlined that the current ruling party in Japan plans to remove crypto assets from a securities classification, alongside other changes which could potentially lead to the approval of crypto ETFs.
The Liberal Democratic Party has also put forward crypto tax reforms that, if implemented, would see a 20% tax rate brought into effect where capital gains on digital assets are concerned.
The finer detail with regard to the nature of insider trading restrictions as they will be applied to crypto assets has yet to be revealed. Nikkei speculated that such restrictions would likely be similar to those applied to conventional financial products.
Last week, the Asia Web3 Alliance Japan, a crypto advocacy group, put forward a proposal to the U.S. Securities and Exchange Commission (SEC) that, if implemented, would see collaboration between the U.S. regulator and Japan’s FSA, its central bank and the Ministry of Economy, Trade and Industry. The objective of the proposal is to bring about cross-border regulatory clarity related to the further development of the Web3 ecosystem in both Japan and the U.S.
