Japan Moves Crypto to Securities Law – Tighter Rules & Platform Crackdowns Coming

Core Viewpoint - Japan is initiating a comprehensive overhaul of its cryptocurrency regulations, transitioning to a framework that aligns digital assets more closely with traditional investment products, reflecting a significant shift in regulatory approach [1][2]. Group 1: Regulatory Changes - The Financial Services Agency (FSA) is moving crypto regulation from the Payment Services Act to the Financial Instruments and Exchange Act, which governs securities trading [2]. - This transition aims to place cryptocurrencies under the same legal framework as securities, enhancing investor protection and market conduct rules [2][4]. Group 2: Market Dynamics - Over 86% of domestic users engage in crypto trading with expectations of long-term price gains, indicating a shift towards investment rather than mere speculation [3]. - Deposits across registered platforms have exceeded five trillion yen, highlighting significant investor interest and inflows into the crypto market [3]. Group 3: Disclosure and Compliance - Stricter disclosure requirements will be imposed on token sales, including pre-sale information, independent code audits, and clear project control descriptions [4]. - Insider-trading rules will be established for events like token listings and major system breaches, applying to exchange employees and token developers [5]. Group 4: Exchange Operations - Exchanges will be required to assess users' risk tolerance before allowing complex or volatile trading, aligning their operations with those of traditional securities brokers [6].