Japan's Financial Services Agency (FSA) is pushing for a historic regulatory reform, preparing to fully transfer the regulatory framework for crypto assets from the Payment Services Act (PSA), which was originally positioned as a "payment instrument," to the more stringent Financial Instruments and Exchange Act (FIEA).
This change signifies that Japan has officially recognized crypto assets as no longer merely a payment method, but as an "investment product" on par with stocks and bonds, and will be subject to securities-level investor protection and disclosure standards. Analysts point out that this move by Japan not only significantly enhances investor protection but also aims to combat fraud and align with mainstream international regulatory frameworks (such as the EU's MiCA).
Regulatory framework adapts to actual circumstances
On December 10, Japan's Financial Services Agency officially released the final research report of the "Financial System Research Association - Crypto Assets and Other Transaction-Related Group." The report bluntly stated: "Both domestically and internationally, people are increasingly treating crypto assets as investment targets." Therefore, the current payment law framework is no longer adequate to meet the actual usage scenarios and must be managed in accordance with the core law of the securities market, the Financial Instruments and Exchange Act, in order to provide more appropriate protection.
The report has been unanimously approved by the expert panel and is expected to be submitted to Congress for legislative amendments and formal implementation as early as 2026.
Reform priorities
This reform includes three core focuses:
First, the disclosure requirements for Initial Exchange Offerings (IEOs, where exchanges audit and sell new tokens on behalf of investors) have been significantly strengthened. In the future, exchanges must provide detailed information on the issuer's identity, the project white paper, the token's economic model, and a third-party audit report of the code before an IEO begins, and are required to disclose risk warnings; even if a project claims to be "decentralized," the issuing team cannot remain anonymous. This move is seen as the strongest measure to end the chaos of past "air coins" (cryptocurrencies with no real value).
Secondly, stricter enforcement will be applied to unregistered platforms. The Financial Services Agency (FSA) will gain greater investigative and punitive powers, allowing it to directly fine overseas platforms, decentralized exchanges (DEXs), or underground trading groups, and even issue shutdown orders. The report also explicitly prohibits insider trading and market manipulation, aligning with the EU's MiCA and South Korea's latest regulations.
Third, tax reforms are being implemented concurrently. Alongside the regulatory shift, the Japanese government is considering changing the tax rate on profits from crypto assets from the current maximum of 55% under "miscellaneous income" to a 20% capital gains tax, the same as for stocks. This is expected to significantly stimulate the participation of both institutional and retail investors. This reform is seen as a major turning point for Japan, moving from "preventing corruption" to "promoting profits."
