Japan to Shift Crypto Oversight from Payments to Securities Law
Japan plans to transfer crypto asset regulation from the Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA), aligning oversight with securities and investment market rules. The Financial Services Agency (FSA) announced the proposal on Wednesday in a comprehensive report by the Financial System Council’s Working Group.
The report sets out a legal shift that would place crypto under the FIEA, the main statute governing securities issuance, trading, and disclosures. According to the document, crypto assets are increasingly treated as investment products domestically and internationally, necessitating user protection through financial product regulation.
Tightening disclosure requirements
Bringing crypto under the FIEA would introduce stricter disclosure obligations for initial exchange offerings (IEOs), or token sales conducted via crypto exchanges. The report notes that user crypto transactions resemble securities dealings, which can involve the sale of new tokens or trading of existing ones, underscoring the need for timely information during IEOs.
Under the proposal, exchanges would be required to provide pre-sale disclosures that include detailed information about the entities behind an offering. Independent third-party code audits would be mandatory, and feedback from self-regulatory organizations should be considered.
The framework also places duties on issuers, requiring them to reveal their identities—even for decentralized projects—and to explain token issuance and distribution methods.
Regulators would receive enhanced enforcement tools to address unregistered platforms, particularly those operating overseas or associated with decentralized exchanges. Explicit prohibitions on insider trading are included, aligning with elements of the European Union’s Markets in Crypto-Assets (MiCA) regime and South Korea’s rules.
The initiative coincides with the government’s consideration of a flat 20% tax on profits from crypto trading.
Separately on Tuesday, the FSA indicated a cautious view on allowing derivatives linked to foreign crypto asset exchange-traded funds, reportedly describing the underlying assets as “not desirable.”
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