Japan plans to include crypto assets in the securities regulatory framework

On December 10, Japan’s financial regulatory system is undergoing a significant shift. The Financial Services Agency (FSA) released the latest report from the Financial System Review Working Group on Wednesday, proposing to transfer the regulatory framework for crypto assets from the current Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA), which primarily targets investment and securities markets. The report notes that crypto assets are increasingly becoming investment targets domestically and abroad, thus requiring user protection standards similar to financial products. Key changes include: • Enhanced IEO Information Disclosure: If incorporated into FIEA, exchange-led IEOs (Initial Exchange Offerings) will be required to provide stricter pre-sale disclosures, including information about the core project team, independent third-party code audits, and opinions from self-regulatory organizations. • Project Teams Must Disclose Real Names: Regardless of decentralization, issuers must disclose their identities and the token issuance and distribution models. • Strengthened Enforcement Powers: The new framework will equip regulators with stronger tools to crack down on unregistered platforms, especially overseas operators or those similar to DEXs, and will explicitly prohibit insider trading. The overall direction aligns with EU MiCA and South Korean regulations. • Tax Reform Progress: Concurrently, the Japanese government is considering a unified tax rate of 20% on crypto trading profits. • Cautious Stance on Derivatives: On the same day, the FSA also expressed a cautious attitude toward licensing derivatives of overseas crypto ETFs, considering the underlying assets “not ideal.”