Japan Passes Law Treating Crypto as Financial Products

Japan’s parliament approved legislation on July 15 that moves cryptocurrency trading into the Financial Instruments and Exchange Act, replacing the sector’s primary treatment as a payment-service activity with a financial-product framework.

The upper house passed the amendments in a 211-31 vote after the lower house approved the bill on June 11. The package covers the Financial Instruments and Exchange Act and Payment Services Act, with the new regime expected to take effect within one year.

Bitcoin, Ether and other crypto assets handled by registered domestic platforms will remain distinct from conventional securities. Businesses offering trading, brokerage, custody and investment services will instead face rules closer to those applied across Japan’s securities market.

Insider Trading and Disclosure Rules Tighten

The amendments introduce direct insider-trading restrictions for crypto assets offered by domestic operators. Covered information includes planned listings or delistings, issuer developments and transactions involving large portions of a token’s supply.

Issuer personnel, exchange employees and parties preparing large trades will be prohibited from trading or recommending transactions before material information becomes public. Violations can bring prison terms of up to five years, fines of up to 5 million yen, or both. The framework also brings crypto market manipulation and insider dealing under Securities and Exchange Surveillance Commission investigations and financial penalties.

Crypto issuers and exchanges will face expanded disclosure duties. Issuers raising capital through designated crypto assets must publish business, financial and token information, while platforms listing assets without a fundraising issuer must disclose core details covering supply, functionality and underlying technology.

Unregistered crypto operations move into the Financial Instruments and Exchange Act’s tougher enforcement system. Maximum imprisonment rises from three years under the payment law to 10 years, while regulators gain access to emergency court injunctions and civil remedies against unauthorized sellers.

Tax Reform and ETF Route Move Forward

The legislation strengthens Japan’s route toward regulated crypto investment products. The country’s largest online brokers are preparing Bitcoin and Ether funds, while Nomura, SBI and other asset managers are positioning for products distributed through conventional securities accounts.

The law does not immediately authorize spot crypto ETFs. Japan must still amend the Investment Trusts and Investment Corporations Act’s enforcement order, complete product reviews and secure exchange approvals. Earlier plans placed the country’s crypto ETF opening around 2028.

Stablecoins remain within Japan’s electronic-payment-instrument framework rather than the new crypto investment rules. The country separately expanded its treatment of qualifying foreign stablecoins in June.