Japan Moves to Treat Crypto Like Stocks, Proposing Insider Trading Ban

• Japan’s FSA to classify cryptocurrencies as financial products, expanding insider trading.
• Bill revising Financial Instruments Act expected in Japanese parliament by 2026.
• Stricter rules for crypto firms, requiring registration regardless of location.

Japan’s Financial Services Agency (FSA) plans to propose a new set of rules classifying cryptocurrencies officially as “financial products,” according to a Nikkei report . 

This move would also expand existing insider trading restrictions to explicitly cover digital assets. The proposed bill aims to revise the country’s Financial Instruments and Exchange Act , with submission to the Japanese parliament expected as early as 2026

Currently, cryptocurrencies including Bitcoin primarily fall under Japan’s Payment Services Act, which mainly regulates them as a means of payment . The proposed changes, however, would reposition them legally as investment products, albeit distinct from traditional securities like stocks or bonds. 

This regulatory shift follows growing concerns voiced by regulators regarding crypto-related fraud and potential insider trading activities within the digital asset market.

How Does Japan’s Plan Align with Global Crypto Rules?

This potential move aligns Japan with developing global regulatory trends aimed at bringing crypto markets under a more established financial oversight. 

The European Union’s comprehensive Markets in Crypto-Assets (MiCA) framework, for instance, already explicitly prohibits insider trading involving crypto-assets. 

In the US, the Securities and Exchange Commission (SEC) notably charged a former Coinbase product manager back in 2022 with insider trading related to crypto asset listings. 

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Additionally, the global standard-setting body IOSCO (International Organization of Securities Commissions) recommended in 2023 that its member jurisdictions apply existing insider trading rules to crypto markets worldwide.

As against these, Japan’s crypto market has also seen significant user growth, with over 7.34 million active trading accounts as of January—more than triple the number from five years ago. This surge is partly driven by smartphone-based trading platforms.

What Stricter Rules Might Crypto Companies Face?

Alongside reclassifying the assets, the FSA also plans stricter rules for companies involved with offering crypto investments or services. 

These firms would likely need to register with Japanese authorities, potentially regardless of their physical location, though cross-border enforcement presents inherent challenges. 

Key specifics, such as precisely which types of crypto assets fall under the new rules and the exact mechanisms of the insider trading restrictions, will be finalized by the FSA in the coming months.

How Does This Contrast with Japan’s Bitcoin Reserve Stance?

Notably, this regulatory focus on treating crypto as a financial product for investment and trading purposes contrasts with the Japanese government’s stated position last December regarding Bitcoin as a reserve asset. 

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At that time, Prime Minister Shigeru Ishiba’s administration responded negatively to a proposal suggesting Japan convert some of its substantial foreign exchange reserves into Bitcoin. The government stated then that cryptocurrencies did not fit its current strategy for managing the nation’s official financial reserves.