Japan Passes Sweeping Crypto Law Revisions, Bringing Digital Assets Under FIEA

Japan has enacted a major overhaul of its cryptocurrency framework, shifting digital assets into the scope of the Financial Instruments and Exchange Act (FIEA) and moving away from the country's earlier, payments-oriented approach under the Payment Services Act (PSA). Nikkei reported that parliament approved the revisions on Wednesday. The changes are designed to position crypto regulation closer to traditional finance, adding market-integrity standards, tightening oversight of firms operating domestically, and strengthening registration and compliance requirements. Key changes in the revised framework • Crypto assets are treated as financial assets under the FIEA, replacing the prior primary treatment under the PSA. • Insider trading restrictions are introduced for issuers, exchanges, and other market participants who possess undisclosed material information. • Penalties increase significantly for operating without required registration. • Registered crypto firms may be reclassified under updated terminology, aligning regulatory language and supervision more closely with traditional financial regulation. From a payments framework to a financial-markets regime Under the previous PSA-centered model, crypto assets were largely regulated as instruments tied to payments. By placing crypto under the FIEA, Japan effectively signals that market conduct, disclosure expectations, and supervisory approaches associated with securities-style regulation will play a larger role in the sector's day-to-day compliance design. Insider trading rules and higher market-integrity expectations The Nikkei report said issuers, exchanges, and other market participants will be barred from trading when they have access to undisclosed material information. The structure is intended to resemble insider trading controls used in traditional finance. For exchanges and intermediaries, that could translate into tighter procedures around the handling of material information, access controls, recordkeeping, and trading management during significant events. Sharper consequences for unregistered operations The revisions also raise the legal stakes for firms conducting business without proper registration. Nikkei said the maximum prison term could increase from three years to 10 years, while fines could rise from about 3 million yen (roughly $19,000) to around 10 million yen. For insider trading violations, the report said penalties could reach up to five years in prison, fines of up to 5 million yen, or both. Reclassification of crypto businesses amid broader "TradFi alignment" Beyond substantive rules, the updated framework reportedly adjusts terminology for registered entities, potentially shifting from "cryptocurrency exchange" to "cryptocurrency trading company." The change reflects regulators' view of crypto activity as closer to trading and market intermediation than payments processing. Japan's move also mirrors a broader global trend: instead of creating fully separate crypto regimes, regulators increasingly map digital-asset activity onto existing financial-regulation categories. Related coverage from Cointelegraph has pointed to similar policy efforts elsewhere, including South Africa's tax authority draft guidance on applying existing tax rules to crypto assets. What the shift means for exchanges and investors For exchanges and other intermediaries, the near-term impact is operational, with compliance systems likely needing upgrades to meet FIEA-style expectations, including stricter oversight, clearer documentation around material information, and stronger controls over who can trade and when. For investors, the changes may improve predictability by applying conduct rules and penalties that more closely resemble established financial markets. Market participants will be watching for implementation guidance, particularly on registration requirements, issuer and exchange compliance expectations, and how authorities will define and enforce "material information" in practice. This article was originally published as "Japan Enacts Crypto Regulatory Overhaul to Apply Financial Rules" on Crypto Breaking News.