The Japanese Financial Services Agency has proposed transferring the management of crypto assets from the Payment Services Law to the Financial Instruments Law, tightening disclosure requirements for IEOs, and cracking down on unregistered platforms.
Japan is preparing to implement a major reform in how it regulates crypto assets as the Financial Services Agency (FSA) announces new guidelines on December 10.
A comprehensive report from the Financial Systems Council Working Group proposes shifting the legal framework for crypto assets from the Payment Services Law, which primarily regulates payment intermediary activities, to the Financial Instruments and Transactions Law – the key legislation governing the securities market, issuance, trading, and disclosure.
This move reflects a shift in regulatory awareness regarding the nature of crypto assets. The report emphasizes that crypto assets are increasingly being used as investment targets both domestically and internationally, requiring a regulatory framework that views them as financial products rather than merely means of payment.
This shift not only better aligns with market realities but also enhances investor protection through stricter requirements for transparency and accountability.
Tighten regulations on issuance and trading.
One of the most significant changes in the new legal framework is the increased disclosure obligations for Token Issuance on exchanges. The report points out that user-driven cryptocurrency transactions are similar to securities transactions, potentially including the sale of new cryptocurrency assets or the buying and selling of existing ones. Therefore, timely disclosure during the IEO process becomes essential to protect investor rights.
According to the new proposal, exchanges will have to provide detailed information before Token Sale, including information about the organizations behind the project, independent third-party source code audit reports, and consultations with self-regulatory organizations. Not only exchanges, but issuers also have an obligation to disclose their identities and describe how the Token are issued and distributed, even if the project operates on a decentralized model.
The new legal framework also gives regulators stronger tools to deal with unregistered trading platforms, especially those operating from overseas or decentralized exchanges. At the same time, the draft clearly prohibits insider trading, similar to regulations within the European Union's MiCA framework and South Korea's crypto asset management law, demonstrating Japan's move towards harmonization with international standards.
This legal reform coincides with changes in tax policy, as the Japanese government is XEM applying a fixed tax rate of twenty percent to all profits from cryptocurrency transactions, instead of the current progressive tax rate which can reach fifty-five percent.
However, the FSA remains cautious about Derivative products, particularly foreign crypto- Exchange Traded Fund (ETFs), as it believes these underlying assets are not XEM appropriate or advisable at the present time.
