Japan Plans to Classify Crypto as Financial Product to Tighten Insider Trading Rules

• Japan aims to reclassify crypto from “means of payment” to financial instruments under the FIEA.
• The move addresses gaps in the Payment Services Act, which currently excludes crypto from market abuse rules governing traditional assets.
• Proposed legal changes will undergo expert review before parliamentary submission in 2026.

Japan is prompting a legal reform that would list cryptocurrencies under the FSA as a category needing even heightened regulation. Exchanges are planning to reclassify tokens as financial instruments and not mere means of payment with the purpose of reducing inside trading issues. Such a decision was made in response to a recently observed upturn of fraudulent cases and usage in the country’s cryptocurrency market.

Proposed Legal Changes Target Insider Trading

According to a report by NikkeiAsia , the FSA intends to revise the Financial Instruments and Exchange Act (FIEA) and submit changes to parliament by 2026. The agency has been reviewing the current legal framework through private expert meetings held behind closed doors. These discussions focus on integrating cryptocurrencies into a regulatory structure that currently governs stocks and bonds.

Currently, digital assets in Japan are treated as “means of settlement” under the Payment Services Act . This legal designation treats them primarily as tools for payment, not as investment vehicles. Consequently, existing oversight has limitations, particularly in areas like insider trading.

The current classification under the Payment Services Act does not cover market abuse rules tied to financial instruments. This regulatory gap means insider trading activities involving crypto have remained outside the scope of traditional market laws. Authorities are now aiming to align crypto oversight with that of other financial products.

Under the proposed reclassification, insider trading laws would apply to crypto transactions. This would include future provisions to define insider information and enforcement mechanisms. However, exact details on penalties or investigation processes remain under development as consultations continue.

Parliament Review Set for 2026

The proposed changes will require approval by Japan’s parliament , with a submission target set for 2026. Before that, experts will continue refining the legal definitions and compliance requirements necessary for crypto firms. These discussions are expected to conclude before the bill reaches the legislature.

Additionally, the FSA has been monitoring the growth of Japan’s digital asset sector. Reports indicate that the rise in crypto usage has paralleled an increase in fraudulent schemes. Authorities believe stricter classifications may enhance legal clarity and close regulatory loopholes.

The proposal is part of broader efforts to ensure market transparency and protect participants in Japan’s evolving digital asset sector. Details on how the reclassification will impact exchanges and users are yet to be finalized.