Japan’s FSA proposes adding crypto to its Financial Instruments Act framework

On Tuesday, Japan’s Financial Services Agency (FSA) proposed a set of rules classifying crypto under the Financial Instruments and Exchange Act as early as 2026. The initiative aims to shift cryptocurrencies from their current classification as a means of settlement under the Payment Services Act.

The plan is to be reviewed by the Financial System Council on June 25. The agency aims to legalize Bitcoin exchange-traded funds (ETFs) and replace the current progressive tax of 55% with a flat 20% on crypto gains.

Japan’s FSA seeks to revise its oversight over crypto service providers

The FSA said it intends to implement stricter regulations on companies involved in crypto investments to register with financial authorities. The regulatory change also comes amid a rise in reports of cryptocurrency-related scams. 

As of April 2025, Japan has been developing its legal and tax regimes for crypto assets. The ruling Liberal Democratic Party’s Web3 Project Team has proposed the classification of digital assets as a distinct asset under the Financial Instruments and Exchange Act (FIEA).

A Financial Services Agency (FSA) survey on investor attitudes found that 7.3% of domestic investors with prior investment experience hold crypto assets, a rate higher than those holding positions in FX trading or corporate bonds.

According to the FSA, the proposed changes will align cryptocurrencies with regulations for stocks and other traditional financial instruments. The entity also revealed that it will amend the Financial Instruments and Exchange Act to implement the changes.

The amendments to the PSA include the relaxation of reserve requirements for stablecoins. The current regulations require issuers of stablecoins to hold the full issuance value in demand deposits and similar highly liquid instruments. The amendment will permit issuers to manage up to 50% of the issuance value in low-risk assets with minimal risk of principal damage.

The other amendment to the PSA will be establishing a new electronic payment crypto asset service system. The existing framework subjects entities acting solely as intermediaries between crypto-asset exchange service providers and users to stringent registration requirements applicable to fully-fledged exchange providers.

The amendment will introduce a new category for intermediaries who do not take custody of customer assets. According to the FSA, the intermediaries will focus exclusively on facilitating transactions by connecting users seeking to buy, sell, or exchange crypto assets with registered crypto exchange service providers or electronic payment service providers.

The FSA also proposed to allow regulatory authorities to issue an order mandating that a business provider’s assets be held within Japan. The amendment aims to prevent cross-border outflow of customer assets in the event of insolvency of a crypto exchange or electronic payment service provider dealing only in spot transactions.

Japan’s shift comes amid a larger initiative among regulatory agencies to shift their approach to governing digital assets. In March, the U.S. Commodity Futures Trading Commission (CFTC) said digital asset derivatives will now receive the same regulatory treatment as other products.

Regulatory agencies shift their approach to governing crypto

In the same period, the Federal Deposit Insurance Corp. issued new guidance allowing financial institutions under its supervision to engage in crypto-related activities without FDIC approval, as long as they adequately manage the associated risks.

“I expect this to be one of several steps the FDIC will take to lay out a new approach for how banks can engage in crypto- and blockchain-related activities in accordance with safety and soundness standards.”

-Travis Hill, Acting Chairman of the FDIC Board of Directors.

The agency also expects to issue additional guidance to clarify banks’ engagement in particular crypto-related activities. The FDIC also hopes to collaborate with other banking agencies to provide further guidance or regulations to replace the current interagency documents covering crypto assets.

Acting Controller of the Currency Rodney E. Hood mentioned that the OCC expects banks to have the same strong risk management controls to support new bank activities as they do for traditional ones. He believes the initiative will reduce the burden on banks to engage in crypto-related activities and ensure that their activities are treated consistently by the OCC.

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