Japan has formally approved legislation recognizing cryptocurrencies as traditional financial instruments under its Financial Instruments and Exchange Act. The new rules, reported by Nikkei, aim to enhance investor protection by prohibiting insider trading and requiring annual disclosures from issuers. Penalties for violations have been significantly increased, with prison sentences for unregistered sellers rising from three years to up to ten years.
Japan has enacted a major regulatory shift, formally classifying cryptocurrencies as financial instruments. This move is designed to provide stronger legal protections for investors in the digital asset market.
The government approved a bill to amend the existing Financial Instruments and Exchange Act. The legislation explicitly regulates crypto assets as financial instruments for the first time.
The new law prohibits insider trading based on undisclosed information. It also mandates that cryptocurrency issuers disclose information to the public once per year.
For the first time, it will regulate crypto assets as financial instruments, prohibiting insider trading based on undisclosed information, according to a report. It will also require cryptocurrency issuers to disclose information once a year, creating a healthy market environment.
Previously, Japan’s Financial Services Agency (FSA) categorized cryptocurrencies under the Payment Services Act. The agency had cited their potential use as a means of payment.
Penalties for market abuses have been substantially increased under the new framework. The prison sentence for unregistered sellers will rise from up to three years to a maximum of ten years.
Fines for violations have also been raised significantly. The maximum penalty increases to 10 million yen (approximately $63,700) from the previous cap of 3 million yen.
