Strengthening Oversight and Investor Protection
Japan’s financial authorities are poised to implement significant regulatory reforms within the country’s cryptocurrency sector. As part of an ambitious effort to strengthen oversight and transparency, the Financial Services Agency (FSA) is drafting legislation that reclassifies digital assets as “financial products” under the Financial Instruments and Exchange Act. This move aims to enhance investor protection, combat insider trading, and align Japan’s crypto regulations with global standards.
Key Regulatory Changes on the Horizon
- •The FSA plans to classify 105 cryptocurrencies as “financial products,” requiring mandatory disclosures for listed tokens.
- •The proposed rules would subject digital assets to insider trading regulations for the first time.
- •Japan aims to overhaul its crypto tax system, introducing a flat 20% capital gains tax on the listed tokens.
- •Discussions are underway about allowing banks to hold and trade cryptocurrencies, including Bitcoin.
Mandatory Disclosures and Enhanced Transparency
Japan is taking concrete steps to reform its cryptocurrency regulatory landscape, signaling a more robust approach to overseeing a rapidly evolving sector. Under the new proposal, exchanges would be mandated to disclose detailed information about each of the 105 cryptocurrencies they list, including issuer identity, underlying blockchain technology, and volatility levels, according to a report from Asahi Shinmun. This initiative aims to bolster transparency and minimize risks for investors in the increasingly active crypto markets.
Combating Insider Trading in Digital Assets
The legislation also brings digital assets under insider trading regulations for the first time, addressing concerns about market manipulation and unfair advantage. Individuals or entities with access to non-public information — such as upcoming token listings, delisting plans, or issuer financial troubles — would be prohibited from trading affected assets, aligning crypto regulations more closely with traditional securities laws. If approved, these measures could establish a new precedent in crypto market integrity.
Overhauling the Crypto Tax System
The FSA’s broader ambition involves overhauling the country’s tax policies. Currently, cryptocurrency gains are taxed as “miscellaneous income,” which can result in rates reaching 55%. The proposed reform seeks to treat crypto profits similarly to stock gains, adopting a flat 20% capital gains tax, aligning Japan more closely with global standards and encouraging institutional participation.
Potential for Banks to Engage with Cryptocurrencies
Additionally, discussions are advancing around allowing banks to hold and trade cryptocurrencies like Bitcoin. Currently barred due to volatility concerns, banks might soon be permitted to acquire digital assets for investment purposes. The FSA is exploring whether banking groups could register as licensed crypto exchanges, offering trading and custody services directly to consumers, potentially heralding a new era for institutional involvement in blockchain and DeFi markets in Japan.