Shift from Payment Services Act to stricter Financial Instruments and Exchange Act aims to strengthen investor protection
Japan’s Financial Services Agency (FSA) has proposed a sweeping regulatory change that could bring cryptocurrencies under the same framework as traditional securities. The agency’s latest report recommends moving oversight from the Payment Services Act to the more stringent Financial Instruments and Exchange Act (FIEA).
Stronger investor protection at the core
The FSA highlighted that many issues in crypto markets mirror those long managed under securities law. These include unclear white papers, inaccurate disclosures, unregistered operations, investment scams, and exchange security concerns.
In its report, the regulator stated: “So it may be appropriate to address them (crypto assets) using the mechanisms and enforcement of the Financial Instruments and Exchange Act.”
While not legally binding, the report was presented to the Financial System Council, which advises Japan’s Finance Minister. The government will decide whether to move forward with legislative changes.
Rising crypto adoption in Japan
Japan is already one of Asia’s most active crypto markets. The FSA report noted that over 12 million domestic crypto exchange accounts have been opened, with user deposits exceeding 5 trillion yen ($33.7 billion).
Still, small-scale trading dominates, with more than 80% of accounts holding less than $675. Interestingly, 7.3% of Japanese investors hold crypto, a larger share than those trading foreign exchange or buying corporate bonds.
Most users fall into the middle-income bracket, and 86% of crypto investors expect long-term price increases.
Finance Minister Katsunobu Kato recently acknowledged crypto’s role in diversified portfolios: “While crypto assets carry the risk of high volatility, by establishing a proper investment environment, they can become an option for diversified investment.”
Impact of applying FIEA rules
Under current law, crypto is treated as a financial instrument only when used as an underlying asset for derivatives. A full move to the FIEA would introduce stricter disclosure requirements for token issuers, ensuring that information asymmetry between issuers and investors is eliminated.
If adopted, the proposal would mark one of the most significant regulatory overhauls for Japan’s crypto sector, aligning it more closely with global securities markets while reinforcing investor safeguards.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.