Japan’s securities regulator will reportedly introduce regulations to ban and punish cryptocurrency insider trading, bringing it closer to the way the country handles stock trading.
Japan’s Securities and Exchange Surveillance Commission would be authorized to investigate suspicious trading activities and impose fines on violators based on how much they benefited from insider trading, Nikkei Asia reported Tuesday.
The securities regulator would also make criminal referrals in more serious cases.
There are no insider trading rules in the Financial Instruments and Exchange Act covering cryptocurrencies, and the self-regulated Japan Cryptoasset and Virtual Asset Exchange Association lacks a monitoring system to detect suspicious transactions, raising the need for stricter regulatory oversight in cryptocurrency markets.
The Financial Services Agency, parent organization of the SESC, will discuss the details of the regulatory framework through a working group in late 2025, with the aim of submitting an amendment proposal to the FIEA next year.
Japanese regulators have limited experience handling cryptocurrency insider trading cases, partly due to the fact that many tokens lack an identifiable issuer, making it difficult to determine who qualifies as insiders, according to Nikkei Asia.
The move towards sensible crypto regulation follows a four-fold increase in the number of local cryptocurrency users to 7.88 million over the past five years, about 6.3% of Japan’s population.
Japan expected to bring in pro-tech prime minister
Sanae Takaichi, who is likely to become Japan’s next prime minister, has been proposed to give new political impetus to risk assets, including cryptocurrencies, while maintaining Japan’s rigorous regulatory standards.
Its leadership would introduce a more open stance towards technological experimentation, having expressed support for “technological sovereignty” and further development of digital infrastructure, such as blockchain technology.
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Takaichi is also in favor of lower interest rates, tax cuts, and looser monetary policy, which could encourage more capital inflows into Japan’s crypto industry.
The FSA wants cryptocurrencies to be regulated according to the FIEA Law
In early September, the FSA attempted to include cryptocurrency regulation in the FIEA Act, replacing it with the Payment Services Act to strengthen investor protection and align cryptocurrencies with securities laws.
The FSA stated that the measure could address common investment issues in the cryptocurrency market, including inaccurate disclosures, unregistered trading, scams, and security concerns related to cryptocurrency exchanges.
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