Japan’s financial regulators are preparing a major overhaul of the country’s crypto oversight regime, proposing to move digital assets out of the existing payments framework and into a regulatory structure designed for securities and investment markets.
The shift, outlined in a new report released Wednesday by the Financial Services Agency (FSA), signals Japan’s recognition that crypto assets increasingly function as investment products rather than payment tools.
The comprehensive document, produced by the Financial System Council’s Working Group, recommends transitioning the legal basis for crypto regulation from the Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA), the primary law governing securities issuance, trading, investor protection, and disclosure standards in Japan.
According to the report, crypto assets “are increasingly being used as investment targets both domestically and internationally,” underscoring the need for a regulatory framework that offers stronger investor protections. Under the PSA, crypto exchanges are supervised mainly as payment processors, but regulators say this no longer reflects how digital assets are used in the market.
Bringing crypto under FIEA would introduce stricter requirements, particularly around disclosures, transparency, and risk information provided to users during token launches.
A key focus is Initial Exchange Offerings (IEOs), token sales conducted by crypto exchanges. Regulators argue that IEOs resemble securities offerings in which timely, accurate data is essential for investor decision-making.
“Crypto transactions conducted by users are similar to securities transactions and may involve the sale of new crypto assets or the buying and selling already in circulation,” the report states, highlighting the need for consistent information standards across offerings.
Japan has long been one of the most structured crypto regulatory environments, but the latest recommendations represent one of its most significant shifts since the 2017 legalization of exchanges. If adopted, moving oversight under FIEA could reshape how domestic exchanges operate, how token issuers disclose information, and how investors evaluate risks.
The FSA is expected to consult industry stakeholders before formal rulemaking begins, signaling Japan’s intent to modernize crypto regulation in line with global financial-market norms.