The Financial Services Agency (FSA) has released a decisive report prepared by the Financial System Council’s Working Group. This official document proposes moving crypto regulation in Japan from the current payments regulations toward a more robust investment framework. The shift responds to the urgent need to protect users, given that these assets are increasingly being used for speculative purposes rather than simple payments.
The strategic plan outlines a fundamental shift in the legal basis, moving away from the Payment Services Act (PSA) to adopt the Financial Instruments and Exchange Act (FIEA). This legislation, which traditionally oversees the issuance and trading of securities, will now encompass the crypto sector. Consequently, authorities acknowledge that digital asset transactions share structural characteristics with traditional financial products, demanding equivalent supervision and compliance standards.
One of the pillars of this reform is the strengthening of data disclosure for Initial Exchange Offerings (IEOs). Since these operations involve the sale of new assets or existing tokens, detailed and timely information will be required for buyers. Exchanges must provide comprehensive pre-sale data regarding the issuers, ensuring that investors fully understand the associated risks before participating in any offering.
How will these demands impact innovation in decentralized projects?
In addition to exchanges, token issuers will face new transparency responsibilities under the scheme proposed by the financial regulator. The regulations will require revealing the identities of creators and distribution methods, even if the project claims to be fully decentralized. Furthermore, mandatory code audits conducted by external experts will be ordered, significantly raising the technical barrier to entry for new launches in the country.
On the other hand, the legal framework will grant regulators more effective tools to combat unregistered platforms operating from overseas. These measures include explicit prohibitions on insider trading, aligning with international standards such as the European MiCA regulation. Thus, Japan seeks to close the net on operators attempting to evade local supervision through decentralized or cross-border structures.
Can the Japanese market maintain its competitiveness with high taxes?
Parallel to this regulatory tightening, the government is debating fiscal measures that could revitalize the digital economy and attract capital. A proposal to reduce the maximum tax rate on crypto profits is being considered, establishing a flat 20% tax for everyone. This initiative could offset the strictness of the new compliance rules, offering a clear financial incentive for investors to operate within the law.
However, the FSA maintains a prudent stance regarding the integration of more complex derivative financial products into the market. Recently, the agency noted that foreign crypto asset Exchange Traded Funds (ETFs) are not desirable due to their inherent high volatility. Ultimately, Japan is moving toward a safer and more mature ecosystem, where investor protection and legal clarity prevail over unchecked speculation.
