Japan’s top financial regulator is weighing a major overhaul of how cryptocurrencies are policed, proposing to shift oversight from the Payment Services Act (PSA) to the much stricter Financial Instruments and Exchange Act (FIEA).
In a report published Tuesday, the Financial Services Agency (FSA) said crypto markets face problems that resemble those seen in traditional securities markets — from vague white papers and misleading disclosures to unregistered operations, investment scams, and weak exchange security. Regulating under FIEA, it argued, would allow stronger enforcement and investor protections.
“So it may be appropriate to address them (crypto assets) using the mechanisms and enforcement of the Financial Instruments and Exchange Act,” the report stated.
The paper is not legally binding. It was prepared by the FSA secretariat as input for the Financial System Council, which advises Japan’s finance minister, who would then decide whether to draft new rules.
Japan is already one of the most active crypto markets globally. Domestic exchanges count more than 12 million accounts, with user deposits topping 5 trillion yen ($33.7 billion) — nearly one account for every 10 citizens. Still, most trading remains small-scale, with over 80% of accounts holding less than $675.
The FSA noted that 7.3% of Japanese investors hold crypto — more than those who trade foreign exchange or buy corporate bonds. Roughly 70% of holders are middle-income earners, and 86% say they invest with the expectation of long-term price appreciation.
The debate follows Finance Minister Katsunobu Kato’s comments in late August that crypto could play a role in diversified portfolios if managed under a proper investment environment.
Currently, FIEA only applies to crypto when used as the underlying asset for derivatives. Expanding it to all crypto would introduce broad disclosure requirements for issuers, regulate intermediaries and brokerages, and empower authorities to block unregistered businesses or unfair trading through emergency injunctions.
If implemented, the move would bring Japan’s crypto oversight closer to securities-style regulation, narrowing the gap between digital assets and traditional finance.
