Japan Approves Crypto Reclassification as Financial Products

Japan's cabinet has approved a draft amendment to the Financial Instruments and Exchange Act, reclassifying cryptocurrencies as financial products rather than mere payment tools. The move, announced on April 10, aims to integrate digital assets into the nation's formal financial framework and could take effect as early as fiscal 2027 if passed by parliament.

Under the previous system, the Financial Services Agency regulated crypto assets primarily through the Payment Services Act, emphasizing antimoney laundering measures, exchange registration and consumer protections for transactions. This approach treated digital currencies like Bitcoin and Ethereum as means of payment, limiting their role in broader capital markets. The new amendment shifts oversight to the Financial Instruments and Exchange Act, the law governing stocks and securities, to address the sector's evolution amid growing institutional interest.

Key provisions include a ban on insider trading, prohibiting trades based on undisclosed information, and a requirement for cryptocurrency issuers to publish annual disclosures on their operations, financial health and risks. Penalties for operating unregistered exchanges...