Japan plans to transition the regulation of crypto assets from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA). The shift reflects rising retail participation and growing fraud concerns, and is anticipated to take effect around 2027.
The number of crypto‑asset accounts in Japan has surpassed 13 million—roughly one in ten residents now holds a crypto‑asset account. While crypto assets have become a mainstream investment product, malicious solicitation and fraud remain prevalent online. The Financial Services Agency (FSA) receives more than 350 consumer inquiries each month—several thousand per year—from individuals reporting harms related to crypto‑asset scams.
Against this backdrop, the Japanese government announced its intention to bring crypto assets within the scope of the FIEA—placing them on a similar footing to traditional financial products. The reform is expected to establish new disclosure obligations, prohibitions on unfair trading, regulatory control, and an administrative monetary penalty framework. Given the high liquidity of crypto assets, it is anticipated that they will generally be subject to requirements comparable to those applicable to Type I Financial Instruments Business Operators. The new framework is currently expected to take effect around 2027.
NFTs and stablecoins will continue to be treated under the existing regime. At the same time, crypto‑asset‑specific provisions will be removed from the Payment Services Act.
Industries likely to be affected
Under the forthcoming regime, FIEA‑based requirements may extend beyond conventional crypto‑asset exchange service providers to encompass issuers, investment advisory businesses, unregistered operators (including those soliciting from overseas into Japan), subsidiaries of banks and insurance companies, and staking service providers.
- Centralized Crypto‑Asset Exchanges (CEXs)
Centralized exchanges are expected to fall under a framework equivalent to Type I Financial Instruments Business. Exchanges will be required to implement robust safety and risk‑management systems, including segregated client asset management, cold‑wallet operations, and transaction review processes. Initial and ongoing disclosure obligations will be introduced. If the company operates other lines of business that is not incidental to exchange services, prior‑approval from the regulator may be required. - Unregistered operators (domestic / overseas)
Criminal and administrative penalties will be strengthened for solicitation and sales conducted without proper registration, including solicitation from abroad targeting consumers in Japan. Fines and criminal sanctions will be raised to deter unlawful solicitation. - Subsidiaries of banks and insurance companies
While banks and insurers are currently not permitted to operate crypto‑asset exchanges in Japan, the government has indicated two significant changes: (i) banks and insurers may hold crypto assets for investment purposes; and (ii) their subsidiaries may be allowed to issue, trade and intermediate crypto assets. These activities will be subject to customer suitability requirements and robust risk‑management frameworks. - Decentralized exchanges (DEXs) and technology providers
The government recognizes that there is not yet a definitive method for regulating decentralized platforms. It plans to explore approaches calibrated to the technical characteristics of DEXs and related technologies. - Investment management and advisory businesses (including staking)
Crypto‑asset investment management and advisory services will be brought within the scope of investment management and investment advisory businesses under the FIEA. Staking and lending services are expected to be regulated as investment management activities. - System providers to exchanges
In view of the rising volume and sophistication of cyberattacks, the government is considering a pre‑notification system for service providers that supply critical systems used by crypto‑asset exchanges to safeguard and manage customer assets.
What compliance steps will be required?
- Disclosure obligations
- Initial disclosures: For centralized crypto assets whose value is effectively controlled by a particular business operator, both the issuer and the exchange will need to disclose the asset’s nature and functions, total supply, technical foundations, and key risks (including liquidity, dilution, technical, and operational risks). Required disclosures may also include use of proceeds and business plans.
- Ongoing disclosures: When events occur that could materially influence trading decisions—such as protocol/ specification changes, technical incidents, or significant movements by large holders—the issuer must make timely disclosures. Issuers will be required to submit periodic report at least once a year.
- Liability for misstatements: False statements or omissions may trigger criminal and civil liability for issuers and exchanges. Administrative monetary penalties and suspension of trading are also under consideration.
- Prohibition of unfair trading
Insider‑trading prohibitions under the FIEA are expected to extend to crypto assets. Transactions conducted before the occurrence or public announcement of “material facts”—such as an issuer’s insolvency, large‑holder disposals, new listings or delistings—would be restricted. The scope is expected to include both on‑exchange and off‑exchange transactions (including DEX and OTC). Authorities also intend to strengthen market surveillance and implement an administrative monetary penalty regime. - Obligations equivalent to Type I Financial Instruments Business
Crypto‑asset exchanges will be required to meet registration standards and internal control frameworks comparable to those for securities firms. This includes customer suitability checks and transaction review systems. Beyond existing hot‑wallet requirements, exchanges will need to maintain reserve funds covering the value of assets held in cold wallets. Wallet service providers will be subject to registration and conduct rules. - Cybersecurity
Statutory obligations will require exchanges to maintain adequate cybersecurity systems. Technical and operational requirements will be specified in flexible guidelines capable of evolving with the environment.
Additional measures under consideration include restrictions on immediate transfers from unhosted (self‑custody) wallets and mandatory warnings against fraudulent solicitations.
Looking ahead
While detailed requirements will depend on the forthcoming bill, businesses across the crypto‑asset ecosystem—issuers, exchanges, investment advisers and managers, staking and lending providers, and technology and system vendors—should closely monitor legislative developments and begin assessing potential obligations under Japan’s evolving regulatory framework.
