Japan's Lower House Approves Crypto Regulatory Overhaul

Japan has taken a major step toward reshaping how cryptocurrencies are regulated. The House of Representatives has approved a bill that would move oversight of crypto assets from the Payment Services Act to the Financial Instruments and Exchange Act, effectively positioning crypto more like investment products such as stocks rather than mainly as a means of payment. Japan's Financial Services Agency said the push reflects how deeply crypto has entered the investment market. Government-cited data show more than 14 million crypto accounts nationwide, with many held by domestic retail investors. About 70% of accounts belong to individuals earning under 7 million yen annually. If enacted, the bill would classify crypto assets as financial instruments and subject trading to rules closer to those of the securities market. CoinDesk reported the new framework is expected to come into force in 2027. The legislation also clears a path for crypto exchange-traded funds (ETFs) in Japan. The ruling Liberal Democratic Party has argued that ETFs could make crypto investing more accessible. Tax treatment is set to become more favorable while trading conduct rules tighten. The framework would introduce insider trading prohibitions to the crypto market, mirroring stock-market standards. Project insiders, including development team members and exchange employees, would be barred from trading tokens when they hold material nonpublic information. Examples include planned listings or delistings, deterioration in business operations, or large transactions likely to move markets. The bill adds tougher disclosure requirements aimed at reducing misleading statements by token issuers. Project teams would need to disclose core information such as technical operations, token supply, and business financials. Where fundraising is done via tokens without an independent audit by an accounting firm, retail investment would be capped at 2 million JPY per investor, a measure designed to curb risk exposure to unaudited projects. Enforcement measures would also be strengthened. The maximum prison sentence for operating an unregistered crypto business would increase from three to 10 years, while the maximum fine would rise to 10 million yen. Japan's securities regulator would gain clearer authority to conduct criminal investigations and could seek court orders to freeze assets.