Japan's Financial Services Agency (FSA) is preparing stricter regulations for cryptocurrencies, with plans to classify them as financial products.

New regulations will be implemented under the compliance rules to stop insider trading according to predictions.

Japan's Financial Services Agency (FSA) is preparing stricter regulations for cryptocurrencies, including plans to classify them as financial products and expand oversight to companies operating outside the country, local news outlet Nikkei reports.

New regulations will be implemented under the compliance rules to stop insider trading according to predictions. The FSA plans to adjust the Financial Instruments and Exchange Act to change how they categorize cryptocurrency assets. Bitcoin is covered by the Payment Services Act, which defines cryptocurrencies as settlement instruments. Meanwhile, administrative penalties will be introduced for executives at companies that engage in market manipulation.

The Financial Services Agency plans to adjust the Financial Instruments and Exchange Act to change how they categorize cryptocurrency assets. Bitcoin is covered by the Payment Services Act, which defines cryptocurrencies as settlement instruments. Meanwhile, administrative penalties will be introduced for executives at companies that engage in market manipulation.

The changes are in response to growing concerns over crypto scams and a surge in trading activity. After the collapse of FTX sparked a broader discussion around crypto exchange regulation, Japan's financial agency is planning to introduce stricter rules against insider trading.

New regulations will be implemented in accordance with the country's compliance framework to prevent such activity according to predictions. The FSA plans to adjust the Financial Instruments and Exchange Act to change how they categorize cryptocurrency assets. Bitcoin is covered by the Payment Services Act, and the new regulatory framework will make cryptocurrencies similar to traditional financial securities.

The proposals will also expand the agency's oversight capabilities to include crypto investment promotion businesses, which will need to register with regulatory authorities. Public authorities now face an increasing number of complaints from investors who say they were tricked into buying cryptocurrencies through promotion on social media.

Japan's crypto market has seen a rapid rise in recent years. Active accounts for crypto trading surpassed 7.1 million in 2024, more than triple the number from five years ago. The rise in trading volume has led regulatory agencies to intensify their scrutiny of market fraud and potential manipulation schemes.

The FSA is also looking to strengthen enforcement mechanisms, including stricter oversight of companies operating outside Japan. While details on enforcement remain unclear, authorities may impose compliance requirements on foreign firms offering crypto-related services to Japanese investors.

Earlier in March, Japan's Cabinet approved a proposal to amend the Payment Services Act to ease regulations for stablecoins and crypto brokerage firms. The amendment could make it easier for businesses to operate in the Japanese market.

The bill has already passed through the FSA and was submitted to the National Diet, Japan's legislative body. Upon receiving approval from the House of Representatives and House of Councillors the bill will be sent to the Emperor who will promulgate it before becoming a law. The legislative process requires every amendment to receive debate together with possible changes prior to final approval.

New stablecoin regulations form a part of the proposed amendment. Currently, stablecoin issuers in Japan must hold an equivalent amount of cash deposits in regulated banks. The regulation permits issuers to utilize bonds and fixed-term deposits as collateral by establishing a 50% restriction on these assets.

The legislation creates an independent category for crypto intermediaries which encompasses brokerages among other businesses. Currently, brokerage firms in Japan must meet the same registration requirements as crypto exchanges. A modified classification scheme will establish better parameters for companies working in this domain.

As Japan adjusts regulations and expands oversight in the evolving crypto landscape, market participants will be closely following developments that could shape the country's digital asset ecosystem.