Japan is significantly strengthening its regulatory framework for digital assets, focusing on cracking down on crypto insider trading and fostering a secure, innovative market. The nation’s securities regulator, the Securities and Exchange Surveillance Commission (SESC), is preparing to introduce amendments that will grant it the authority to investigate and penalize individuals involved in crypto-related insider trading.
This move aims to align the oversight of the rapidly expanding crypto market—which has seen its local user base quadruple to 7.88 million over the last five years—with the robust standards currently applied to stock trading.
The proposed regulations would empower the SESC to investigate suspicious trading activities, levy fines based on ill-gotten profits, and refer serious cases for criminal prosecution. Currently, the Financial Instruments and Exchange Act (FIEA) lacks specific rules covering crypto insider trading, and the self-regulated Japan Virtual and Crypto Assets Exchange Association (JVCEA) does not have a formal system to monitor such activity.
This regulatory gap has prompted the need for stronger official oversight. The SESC’s parent organization, the Financial Services Agency (FSA), plans to finalize the framework’s details through a working group by the end of 2025, with a proposed amendment to the FIEA expected next year. Regulators face the complex challenge of defining who qualifies as an “insider” for many tokens that lack a clear, identifiable issuer.
This push for enhanced investor protection is part of a broader regulatory shift by the FSA, which sought to place crypto asset regulation under the FIEA Act instead of the current Payments Services Act earlier in September. This reclassification is intended to strengthen investor safeguards and apply securities law principles to digital assets, helping to address common market issues like inaccurate disclosures, unregistered operations, scams, and exchange security concerns.
Adding political momentum to the technological landscape is Sanae Takaichi, who is expected to become Japan’s next prime minister. Takaichi is tipped to bring a fresh, pro-tech approach, supporting “technological sovereignty” and the development of digital infrastructure, including blockchain technology. While she is expected to maintain Japan’s rigorous regulatory standards, her leadership could introduce a more open stance toward tech experimentation.
Furthermore, Takaichi’s favorable position on lower interest rates, tax cuts, and a looser monetary policy could potentially encourage greater capital inflows and investment into Japan’s crypto industry.
~Rushen Wickramaratne
