Japan Moves Crypto Under Financial Law, Toughens Penalties For Fraud

Japan had over 13 million crypto accounts when its financial regulator started fielding more than 350 fraud complaints every month. Those numbers helped push the government toward a major regulatory overhaul — one that officially cleared the cabinet this week.

A Shift Away From Payment Rules

For years, crypto in Japan was governed under the Payment Services Act, a framework built around digital money and transactions rather than investment activity.

That changes under the newly approved amendment to the Financial Instruments and Exchange Act, known as the FIEA.

The revision treats crypto assets the same way the law treats stocks and bonds — as financial products subject to stricter rules, required disclosures, and explicit prohibitions on insider trading.

Finance Minister Satsuki Katayama addressed reporters after the cabinet approved the bill. “In response to changes in financial and capital markets, we will expand the supply of growth capital while ensuring market fairness, transparency, and investor protection,” she said.

The Financial Services Agency had been signaling this shift since late 2025. The cabinet’s approval this week moves that plan out of the proposal stage and into formal legislation.

Penalties Rise Sharply For Unlicensed Operators

The new law carries real consequences for bad actors. Prison sentences for unlicensed crypto operators would jump from a maximum of three years to 10. Fines would increase from ¥3 million to ¥10 million.

Trading on undisclosed information — insider trading — would be explicitly banned under the FIEA framework, a prohibition that did not exist under the old payment services rules.

The changes also come with new paperwork requirements. Issuers will be required to file annual disclosures, bringing them closer in line with publicly listed companies.

Registered firms will also be renamed, from “crypto asset exchange operators” to “crypto asset trading operators” — a small change in language that reflects the larger shift in how the government now views the industry.

Timeline Depends On Parliamentary Session

Whether the law takes effect in fiscal year 2027 depends on the current parliamentary session. If passed during the ongoing session, that timeline holds. Reports indicate the FSA has been laying the groundwork for this transition for months.

Japan has long been one of the more active countries in setting rules for digital assets. This latest move brings its regulatory approach closer to the standards applied to traditional financial markets, covering investor protections, market oversight, and criminal penalties in one consolidated framework.

Featured image from PlanetofHotels.com, chart from TradingView