Japan's Financial Services Agency (FSA) Plans to Classify Cryptocurrencies as "Financial Products"

This move would also expand existing insider trading restrictions to explicitly cover digital assets. The proposed bill aims to revise the country's Financial Instruments and Exchange Act

Japan’s Financial Services Agency (FSA) is proposing a new set of rules that would classify cryptocurrencies as "financial products" and expand existing insider trading restrictions to explicitly cover digital assets, according to a Nikkei report.

The proposed bill, which aims to revise the country’s Financial Instruments and Exchange Act, will be submitted to the Japanese parliament as early as 2026.

Currently, cryptocurrencies such as Bitcoin primarily fall under Japan’s Payment Services Act, which mainly regulates them as a means of payment. However, the proposed changes would legally reposition them as investment products, albeit distinct from traditional securities like stocks or bonds.

This regulatory shift follows growing concerns raised by regulators regarding crypto-related fraud and potential insider trading activities within the digital asset market.

How Does Japan’s Plan Align with Global Crypto Rules?

This potential move aligns Japan with emerging global trends in regulating crypto markets with more established financial oversight. For instance, the European Union’s comprehensive Markets in Crypto-Assets (MiCA) framework already explicitly prohibits insider trading involving crypto-assets.

In the U.S., the Securities and Exchange Commission (SEC) charged a former Coinbase product manager in 2022 with insider trading related to crypto asset listings. Additionally, the global standard-setting body IOSCO (International Organization of Securities Commissions) recommended in 2023 that its member jurisdictions apply existing insider trading rules to crypto markets.

As against these, Japan’s crypto market has also seen significant user growth, with over 7.34 million active trading accounts in January—more than triple the number from five years ago. This surge is partly driven by smartphone-based trading platforms.

What Stricter Rules Might Crypto Companies Face?

Alongside reclassifying the assets, the FSA plans stricter rules for companies involved with offering crypto investments or services. These firms would likely need to register with Japanese authorities, potentially regardless of their physical location, though cross-border enforcement presents challenges.

Key specifics, such as precisely which types of crypto assets fall under the new rules and the exact mechanisms of the insider trading restrictions, will be finalized by the FSA in the coming months.

How Does This Contrast with Japan’s Bitcoin Reserve Stance?

Notably, this regulatory focus on treating crypto as a financial product for investment and trading purposes contrasts with the Japanese government’s stated position last December regarding Bitcoin as a reserve asset.

Then, Prime Minister Shigeru Ishiba’s administration responded negatively to a proposal suggesting Japan convert some of its substantial foreign exchange reserves into Bitcoin. The government stated that cryptocurrencies did not fit its current strategy for managing the nation’s official financial reserves.