Japan is preparing new regulations to strictly prohibit the use of insider information in the cryptocurrency market, aiming to bring digital assets under the same regulatory framework as traditional financial instruments. The financial authority plans to empower regulators to impose fines based on profits earned from violations and refer serious cases for criminal prosecution, similar to the oversight applied to securities markets. The proposed framework will place cryptocurrencies under the Financial Instruments and Exchange Act (FIEA) and create a solid institutional foundation for supervision, with principles expected to be finalized by the end of 2025 and legislation proposed in 2026.
The draft regulations explicitly ban trading based on non-public information related to cryptocurrencies. The Securities and Exchange Surveillance Commission (SESC), known for monitoring securities, will investigate suspicious transactions and propose additional penalties calculated on illicit gains, with serious violations referred for criminal investigation. The move addresses gaps in the current self-regulatory framework, which required a centralized application architecture under the Japan Virtual and Crypto Assets Exchange Association (JVCEA).
The plan clarifies definitions of insider trading for cryptocurrencies and will be followed by detailed secondary regulations outlining practical applications. Bringing cryptocurrencies under the FIEA aligns them with traditional financial products in terms of disclosure requirements and market manipulation standards. The Financial Services Agency (FSA) is expected to submit the proposed legislation to parliament in 2026.
The new rules aim to prevent sudden price fluctuations caused by pre-listing information leaks and address challenges in defining “insiders,” particularly for decentralized tokens. By establishing active public supervision, the regulations replace reliance on internal exchange protocols and have the potential to boost institutional confidence in Japan’s cryptocurrency market, which has grown steadily over the past five years. The framework is expected to enhance transparency, equal access to information, and investor protection standards, while local exchanges are likely to increase compliance investments and strengthen internal controls for listing processes as the timeline progresses.