Japan’s securities regulator is reportedly set to introduce regulations to ban and punish crypto insider trading, bringing it more in line with how the country handles stock trading.
Japan’s Securities and Exchange Surveillance Commission would be authorized to investigate suspicious trading activity and hit violators with fines based on how much they profited from insider trading, Nikkei Asia reported on Tuesday.
The securities regulator would also make criminal referrals in more serious cases.
There are no insider trading rules under the Financial Instruments and Exchange Act that cover crypto, and the self-regulated Japan Virtual and Crypto Assets Exchange Association lacks a monitoring system to spot suspicious trading, prompting the need for stronger regulatory oversight in the crypto markets.
The Financial Services Agency, the SESC’s parent organization, will discuss the details of the regulatory framework through a working group by the end of 2025, with the goal of submitting a proposed amendment to the FIEA next year.
Japanese regulators have limited experience dealing with crypto insider trading cases, partly due to the fact that many tokens lack an identifiable issuer, making it difficult to determine who qualifies as an insider, according to Nikkei Asia.
The move toward sensible crypto regulation follows a fourfold increase in the number of local crypto users to 7.88 million over the last five years — about 6.3% of Japan’s population.
Japan expected to bring in pro-tech prime minister
Sanae Takaichi, who is likely to become Japan’s next prime minister, has been tipped to bring fresh political momentum to risk assets, including crypto, while maintaining Japan’s rigorous regulatory standards.
Her leadership would introduce a more open stance toward tech experimentation, having expressed support for “technological sovereignty” and further development of digital infrastructure, such as blockchain tech.
Takaichi is also in favor of lower interest rates, tax cuts, and a looser monetary policy, potentially encouraging more capital inflows into Japan’s crypto industry.
FSA wants crypto to be regulated under the FIEA Act
At the start of September, the FSA sought to place crypto regulation under the FIEA Act, shifting it from the Payments Services Act to strengthen investor protection and align crypto with securities laws.
The FSA stated that the move could address common investment issues in the crypto market, including inaccurate disclosures, unregistered operations, scams, and security concerns related to crypto exchanges.