Japan plans to include crypto assets in the securities regulatory framework

Japan's financial regulatory system is undergoing a significant shift. The Financial Services Agency (FSA) of Japan released the latest report from the Financial System Council's working group on Wednesday, proposing to shift the regulatory basis 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 both domestically and internationally, thus requiring user protection based on financial product standards.

Key changes include:
• Strengthened IEO disclosure: If included under FIEA, exchange-led IEOs (Initial Exchange Offerings) will be required to conduct stricter pre-sale disclosures, including information about the core project team, independent third-party code audits, and input from self-regulatory organizations.
• Real-name disclosure by issuers: Regardless of whether they are decentralized, issuers must disclose their identities and the token issuance and distribution models.
• Enhanced enforcement powers: The new framework will grant regulatory authorities stronger tools to combat unregistered platforms, especially overseas operators or those similar to DEXs, and will explicitly prohibit insider trading, aligning overall direction with the EU's MiCA and South Korean regulations.
• Concurrent tax reform: At this time, the Japanese government is considering unifying the tax rate on crypto trading profits to a single rate of 20%.
• Cautious attitude towards derivatives: On the same day, the FSA also expressed a cautious stance on the licensing of overseas crypto ETFs, believing that the underlying assets are not ideal.