Japan's cabinet approved a bill on Apr. 10 classifying cryptocurrencies as financial instruments under the amended Financial Instruments and Exchange Act that subjects digital assets to the same regulatory framework as stocks and bonds.
Japan's Crypto Reclassification
The legislation marks a formal shift from the country's earlier approach. Japan's Financial Services Agency (FSA) had previously regulated crypto assets under the Payment Services Act, treating them primarily as a means of payment.
Under the new rules, insider trading based on undisclosed information is now prohibited for crypto assets. Cryptocurrency issuers will also face annual disclosure requirements aimed at improving market transparency.
Penalties for violations have increased sharply. The maximum prison sentence for unregistered sellers rises from three years to ten years, while fines jump from 3 million yen to 10 million yen.
Finance Minister Satsuki Katayama said at a press conference after the cabinet meeting that the government would "expand the supply of growth capital" while ensuring "market fairness, transparency, and investor protection."
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Katayama's Broader Vision
The bill fits into a wider overhaul that Katayama signaled months ago. In January, she declared 2026 "Digital Year One" and emphasized the role of exchanges and market infrastructure in helping citizens benefit from blockchain-based assets.
The government backed plans in December to cut Japan's maximum crypto tax rate from as high as 55% to a flat 20%, aligning digital asset taxation with stocks. Japan is also exploring the legalization of crypto exchange-traded funds by 2028.
FSA's Regulatory Path
The FSA's push to bring digital assets under securities-grade oversight has been building since late 2025. The agency proposed reclassifying 105 cryptocurrencies — including Bitcoin (BTC) and Ethereum (ETH) — as financial products, extending mandatory disclosures and consumer protections to the sector.
Japan's crypto account holders now number more than 13 million, roughly one in ten residents. The FSA receives over 350 consumer inquiries each month related to crypto fraud, a volume that regulators cited as justification for tighter rules.
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