Japan has taken a decisive step to bring cryptocurrency into the core of its financial system. On Friday, the government approved an amendment to the Financial Instruments and Exchange Act, formally reclassifying crypto assets as financial instruments rather than payment tools. The change means that digital assets will now work differently under Japanese law, and it also means that they will be more in line with traditional finance.
The decision follows years of regulatory evolution led by the Financial Services Agency, which previously oversaw crypto under the Payment and Settlement Act. That earlier framework treated digital assets as a means of payment. The new classification places them alongside stocks, bonds, and derivatives under a stricter legal regime.
BREAKING: 🇯🇵 Japan's cabinet has approved a bill to classify Ethereum and other crypto as financial products! pic.twitter.com/XBsRvgqxAM
— Coinvo (@Coinvo) April 10, 2026
Insider trading ban and disclosure rules take effect
The amendment introduces a clear ban on insider trading in crypto markets. Market participants can no longer buy or sell digital assets based on undisclosed information. According to Nikkei, the law targets practices that undermine fairness and transparency, which have long been concerns in crypto trading.
Crypto “issuers” must now meet higher disclosure standards. Each issuer has to provide financial information at least once per year. This requirement aims to create a more transparent environment for investors and aligns crypto reporting obligations with those of traditional financial products.
Penalties for non-compliance have also increased. Companies that operate without proper registration face stricter consequences. The updated framework raises potential prison sentences from three years to up to ten years and increases fines from 3 million yen to 10 million yen. Authorities intend to strengthen investor protection through these tougher measures.
Shift reflects growing institutional demand
The move is a clear reaction to more institutions showing interest in crypto assets. In recent years, investment activity has shifted away from simple transactional use toward portfolio allocation and long-term exposure. The new law acknowledges that change and adapts the regulatory structure accordingly.
Finance Minister Satsuki Katayama emphasized the broader goal during a Cabinet briefing.
“We will expand the supply of growth capital in response to changes in financial and capital markets, and ensure market fairness, transparency, and investor protection,” she said.
Earlier remarks from Katayama also highlighted the importance of exchange infrastructure. She stated that a robust ecosystem would allow citizens to benefit from blockchain-based assets. The latest amendment translates that vision into concrete policy.
Tax reform and ETF plans signal long-term strategy
Japan has not limited its efforts to regulation alone. The government has also moved to reform crypto taxation. In December 2025, officials supported a proposal to replace the progressive tax system, which reached up to 55%, with a flat 20% rate on crypto profits. The change would align crypto taxation with equities and could encourage broader participation.
The roadmap extends further. Authorities plan to legalize crypto exchange-traded funds by 2028, as HodlFM reported earlier this year. This step would open the door to regulated investment vehicles tied to assets such as Bitcoin and Ethereum. It would also place Japan among jurisdictions that integrate crypto products into mainstream financial markets.
Major firms such as Nomura Holdings and SBI Holdings are expected to play a leading role in developing these products. Their involvement signals confidence from established financial institutions as the country builds its crypto investment framework.
From experimental asset to financial mainstream
The new classification is a clear break from how Japan used to do things. Under the Payment and Settlement Act, crypto functioned mainly as a digital payment tool. Under the revised Financial Instruments and Exchange Act, it now holds the same legal status as traditional financial instruments.
This transition also changes how regulators view market behavior. Rules that govern equities now extend to crypto, including restrictions on unfair trading practices and requirements for transparency. The government aims to create a stable environment that supports both innovation and investor protection.
If the legislation passes through Japan’s parliament as expected, enforcement could begin in the 2027 fiscal year. The timeline gives market participants time to adjust to the new framework while preparing for stricter compliance standards.
Japan’s approach indicates a broader shift in global financial policy. Rather than treat crypto as a separate or experimental sector, regulators now move to integrate it into established systems. The country’s latest reform positions it as one of the more structured crypto markets, with clear rules, stronger oversight, and a long-term plan for growth.
Matvii Diadkov
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