SKN | Japan Prepares Major Regulatory Overhaul as Crypto Shifts From Payments to Securities Law

Japan is preparing to overhaul the legal foundation of its cryptocurrency market, signaling a decisive shift in how digital assets are treated within the country’s financial system. In a move that aligns domestic policy with global regulatory developments, the Financial Services Agency (FSA) on Wednesday outlined plans to migrate crypto oversight from Japan’s payments framework to its securities and investment regime.

The proposal reflects the growing reality that cryptocurrencies in Japan — and globally — function less as payment instruments and more as speculative and investment assets. Regulators say the shift is necessary to impose stronger disclosure standards, reduce information asymmetry and strengthen investor protections at a time when token issuance and secondary trading continue to mature.

Crypto to Move From Payment Services Act to Securities Law

The FSA’s report, released through the Financial System Council’s Working Group, recommends moving crypto asset regulation from the Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA) — the same law governing securities, derivatives, and investment products.

“Crypto assets are increasingly being used as investment targets both domestically and internationally,” the report noted. By placing digital assets under FIEA, regulators aim to apply investor-protection rules typically reserved for securities markets, including stricter licensing standards, operational oversight and enhanced reporting requirements.

The transition marks one of Japan’s most significant regulatory pivots since the aftermath of the Mt. Gox collapse in 2014, which shaped the country’s early reputation as one of the world’s most crypto-forward jurisdictions.

IEOs Face Stricter Disclosure Demands Under New Regime

One of the most immediate impacts of the proposed shift is the introduction of tougher disclosure obligations for initial exchange offerings (IEOs), the fundraising mechanism used by Japanese crypto exchanges to support token sales.

Under the proposed framework, platforms conducting IEOs would be required to:

• Provide detailed pre-sale disclosures on the issuer and token economics
• Commission independent third-party code audits
• Integrate feedback from self-regulatory organizations
• Identify project backers and team members — even for decentralized projects

The FSA argues that IEOs mirror the characteristics of securities issuance and therefore demand a level of transparency consistent with investor expectations in traditional capital markets. Regulators also view stricter disclosures as a tool to mitigate fraud, asymmetric information, and governance failures that have plagued token launches globally.

Regulators to Crack Down on Unregistered and Overseas Platforms

By shifting crypto into the FIEA regime, Japan would also gain stronger enforcement tools against unregistered platforms, including decentralized exchanges and offshore entities that serve Japanese users without licenses. The framework introduces explicit restrictions on market manipulation and insider trading — areas where global regulators have sought alignment with the EU’s MiCA and South Korea’s tightening rules.

The initiative comes as Japan weighs lowering its crypto tax rates, including a potential uniform 20% tax on crypto capital gains, a reform widely welcomed by local industry participants seeking competitive parity with global markets.

A Cautious Approach to Derivatives and ETFs

While Japan is pushing digital-asset rules forward, the FSA also signaled caution this week on allowing domestic derivatives tied to foreign crypto exchange-traded funds, reportedly calling such underlying products “not desirable.” The stance suggests regulators will move selectively even as the broader framework shifts toward securities treatment.

A New Phase for Japan’s Crypto Market

Japan’s planned regulatory overhaul underscores a growing consensus that digital assets are evolving beyond their payments origins and should be governed within market structures designed for investor protection and financial stability. The move could reshape how projects launch, how exchanges operate and how foreign platforms engage with Japanese users.

If approved, the shift to FIEA will mark the start of a more mature, disclosure-driven phase in Japan’s crypto landscape — one that may encourage institutional participation while imposing clearer guardrails on an industry still marked by rapid innovation and persistent risk.

Key Points

1. Japan plans to move crypto oversight from the Payment Services Act to the securities-oriented Financial Instruments and Exchange Act.

2. New disclosure rules for IEOs will require identity verification, code audits and expanded transparency from issuers and exchanges.

3. The framework strengthens enforcement against unregistered platforms and adds insider-trading prohibitions aligned with global standards.