Japan’s financial regulator is preparing a regulatory shift for Bitcoin and cryptocurrencies to combat fraud.
The Financial Services Agency (FSA) of Japan is planning to propose reclassifying digital assets as financial products, according to Nikkei. This move marks a shift in cryptocurrency regulation in the Asian country.
Currently, Japan classifies Bitcoin and other cryptocurrencies as payment methods under the Payment Services Act. However, the FSA intends to propose amendments to the Financial Instruments and Exchange Act, which will be presented to Parliament by 2026, following a thorough review of the current regulatory framework.
According to Nikkei, the upcoming bill will likely place digital assets in a category separate from other financial securities, such as stocks and bonds. However, the rules around insider trading are expected to mirror those governing conventional financial products, although specific details of these regulations have not yet been disclosed.
Cryptocurrencies in the spotlight of Japanese authorities
The Japanese financial agency is seeking to strengthen its oversight of local digital asset service providers in response to the rise of cryptocurrency-related fraud cases. With the reclassification of Bitcoin and other digital assets as financial products, not only exchanges but also companies soliciting investments in cryptocurrencies will be required to register with financial regulatory authorities.
While the FSA aims to apply the new rules to companies serving local citizens, regardless of their location, it remains unclear how the agency intends to enforce the regulations on foreign entities. Last month, the FSA formally requested Apple and Google to block five unregistered foreign crypto exchanges from their respective app stores in Japan.
According to Nikkei, Japan had around 7.34 million active cryptocurrency trading accounts as of January.
