Japan’s Financial Services Agency (FSA) is preparing to introduce sweeping legal amendments aimed at banning insider trading in cryptocurrency markets, marking a major step toward aligning crypto regulation with traditional financial markets.
The proposed framework would give the country’s Securities and Exchange Surveillance Commission (SESC) direct authority to investigate, penalize, and refer criminal cases related to insider trading in digital assets a first for Japan’s crypto sector.
Crypto Insider Trading to Be Treated Like Stocks and Bonds
According to a report from Nikkei, the FSA is drafting amendments to the Financial Instruments and Exchange Act (FIEA) that would formally extend insider trading restrictions to cryptocurrencies.
Currently, Japan’s insider trading laws apply only to traditional assets such as stocks and bonds, leaving crypto under the Payment Services Act (PSA) a framework originally designed to oversee payment systems rather than speculative investments.
If passed, the new regulations would bring crypto under the same regulatory umbrella as securities, making it subject to the same level of scrutiny and enforcement.
The draft legislation is expected to be submitted to parliament sometime next year, following public consultations and interagency review.
Expanded Powers for Japan’s Financial Watchdog
Under the upcoming changes, the Securities and Exchange Surveillance Commission (SESC) will gain the legal authority to:
- Probe suspected insider trading cases in the crypto sector;
- Issue surcharge recommendations for civil penalties; and
- Refer serious violations for criminal prosecution.
The agency will focus particularly on major trades based on undisclosed, non-public information similar to how insider trading is defined in traditional securities markets.
By assigning supervisory powers to the SESC, regulators aim to ensure fairer market conditions and strengthen investor confidence in Japan’s fast-growing digital asset industry.
A Growing Market, Growing Risks
Japan’s crypto market has expanded dramatically in recent years. As of August 2025, there were approximately 7.88 million active crypto accounts nationwide a fourfold increase compared to five years ago.
This surge in activity has heightened concerns over market manipulation, insider trading, and unequal access to information.
Until now, Japan relied primarily on crypto exchanges and the Japan Virtual and Crypto Assets Exchange Association (JVCEA) to detect and report suspicious trading behavior. However, many analysts and policymakers have argued that self-regulation alone is no longer sufficient.
With the SESC assuming oversight, Japan expects to formalize enforcement procedures and close regulatory loopholes that have persisted in the crypto sector.
What the New Rules Will Entail
The upcoming amendments to the FIEA will explicitly prohibit trading digital assets based on undisclosed insider information. The FSA will also issue guidelines detailing the types of conduct that constitute violations.
This move effectively puts cryptocurrencies on par with traditional investment assets, such as equities and bonds — though the agency acknowledges that crypto’s unique characteristics make enforcement more complex.
Because many crypto projects lack centralized issuers or corporate structures, defining what qualifies as “insider information” can be difficult. The FSA is therefore expected to develop clearer definitions and case-specific criteria to guide investigations.
Reclassifying Crypto as Financial Products
In parallel, the FSA is reportedly considering reclassifying crypto assets as financial instruments under the FIEA.
Such a reclassification could have tax implications, potentially reducing capital gains tax on crypto investments to 20%, compared to the current system that can reach as high as 55% depending on income brackets.
This proposal aligns with Japan’s broader goal of making its regulatory and tax environment more crypto-friendly, thereby encouraging domestic innovation and investment while still maintaining market integrity.
A Step Toward Global Standards
Japan’s push to criminalize insider trading in crypto mirrors similar discussions in other leading economies, including the United States and European Union, where regulators are tightening oversight around market manipulation and transparency in digital assets.
By expanding the FSA’s jurisdiction and enhancing the SESC’s authority, Japan aims to strike a balance between innovation and accountability, cementing its reputation as one of the world’s most mature crypto regulatory environments.
The Bottom Line
With insider trading bans on the horizon, Japan is taking a decisive step toward cleaning up its crypto markets and aligning digital assets with traditional financial laws.
If enacted, the reforms will not only deter misconduct but also reinforce investor trust, positioning Japan as a global model for responsible crypto governance.
