Japan to regulate crypto as financial products by 2026

Japan’s Financial Services Agency (FSA) is preparing to revise its financial laws to classify cryptocurrencies as financial products by 2026, according to a report from Nikkei.

The proposed changes aim to bring cryptocurrencies under insider trading regulations similar to those governing stocks and other financial instruments.

Currently, insider trading laws prohibit trading based on confidential information, and the FSA plans to extend these rules to cryptocurrencies.

However, cryptocurrencies are expected to be categorised separately from securities such as stocks and bonds.

The FSA intends to submit a bill to parliament next year after internal discussions finalise the details.

If approved, companies offering cryptocurrency services will be required to register with the FSA, ensuring compliance with Japan’s financial regulations.

The agency also plans to enforce these rules on foreign companies operating within Japan’s jurisdiction, although enforcement mechanisms for overseas entities remain unclear.

Additionally, distinctions between widely traded assets like Bitcoin (CRYPTO:BTC) and Ether (CRYPTO:ETH) versus speculative tokens such as memecoins are yet to be determined.

This regulatory shift aligns with Japan’s broader efforts to establish a structured framework for digital assets.

Earlier this year, Japan issued its first license for stablecoin transactions through SBI VC Trade, a subsidiary of SBI Holdings, enabling support for Circle’s USDC (CRYPTO:USDC) stablecoin.

The country has also proposed reducing the capital gains tax on cryptocurrencies from 55% to 20%, categorising them as distinct asset classes for tax purposes.

Furthermore, Japan is considering lifting restrictions on crypto-based exchange-traded funds (ETFs), following Hong Kong’s approval of crypto ETFs in 2024.

These initiatives reflect Japan’s evolving stance on cryptocurrency regulation, balancing innovation with investor protection.