Japan is preparing a major overhaul of its crypto regulatory framework by shifting oversight from payments law to securities legislation. The change aims to tighten disclosure rules for initial exchange offerings (IEOs) and strengthen enforcement against unregistered trading platforms.
The Financial Services Agency (FSA) released a detailed report from the Financial System Council’s Working Group, outlining how crypto regulation should evolve across multiple sectors. According to the proposal, the legal foundation for oversight would move from the Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA). FIEA is Japan’s core securities law, covering market supervision, investor protection, and disclosure requirements.
The report notes that crypto assets are now widely used as investment products both in Japan and abroad. Because of this shift, regulators argue that crypto should be governed under a framework designed for financial markets rather than payment services.
Stronger IEO disclosure rules
One of the most significant changes under FIEA would be stricter disclosure obligations for IEOs. Token sales conducted through exchanges would need detailed pre-sale information about the projects and the entities supporting them. The proposal also requires independent code audits and encourages the involvement of self-regulatory bodies.
Responsibilities would extend to issuers as well. They would be required to reveal their identities, even if a project claims to be decentralized, and provide transparent information on token issuance and distribution models.
Tougher action against unregistered platforms
The new framework would give Japanese regulators more authority to take action against unregistered crypto platforms, including overseas services and decentralized exchanges. The proposal also introduces clear insider trading prohibitions, aligning Japan more closely with the EU’s MiCA rules and South Korea’s updated crypto framework.
The regulatory shift comes as the Japanese government considers reducing the maximum tax rate on crypto profits. A flat 20% tax on all crypto gains is currently under discussion.
On Tuesday, the FSA also signaled hesitation toward allowing derivatives based on foreign crypto asset exchange-traded funds, describing these underlying assets as “not desirable” for domestic markets.
