Key Takeaways
- The FSA’s report recommends shifting crypto away from its current classification under the Payment Services Act
- As per the proposal, crypto’s role in payment transactions would remain intact even under securities law.
Japan’s regulatory body Financial Services Agency (FSA) has proposed moving cryptocurrencies under the country’s Financial Instruments and Exchange Act (FIEA), a framework traditionally used to regulate securities. The idea was outlined on September 2 during a Financial System Council working group session, where officials argued that stronger oversight is needed as digital assets increasingly function like investment products.
The FSA’s report recommends shifting crypto away from its current classification under the Payment Services Act, arguing that many of the risks often associated with digital assets like misleading disclosures, investment scams, unregistered operations, and security lapses at exchanges, closely resemble issues already covered by the FIEA.
The FSA will submit a legislative amendment to the ordinary Diet session next year. As per the proposal, crypto’s role in payment transactions would remain intact even under securities law. The body noted that crypto firms offering crypto tokens must provide detailed disclosures, which should include details on price volatility, reliability, and other associated risks.
The document, which is advisory rather than binding, was prepared by the FSA secretariat to guide discussions at the Financial System Council, an advisory body to the Financial Services Minister. Any legal change would ultimately depend on government approval.
The latest move comes against the backdrop of Japan’s crypto market growing significantly, with more than 12 million accounts opened at domestic exchanges and user deposits surpassing 5 trillion yen ($33.7 billion). That figure equates to nearly one account for every 10 residents. Despite the scale, most accounts are relatively small, with over 80% of individual traders holding less than $675.
Survey data cited by the FSA shows that 7.3% of investors in Japan own crypto, more than those engaged in foreign exchange or corporate bonds. Around 70% of holders are middle-income earners, and 86% expect long-term price gains from their investments.
The proposal comes after Finance Minister Katsunobu Kato acknowledged the role of digital assets in diversified investment strategies. Last month, he said: “While crypto assets carry the risk of high volatility, by establishing a proper investment environment, they can become an option for diversified investment.”
