Japan to Introduce New Regulations Targeting Crypto Insider Trading

Japan is preparing to revise its regulations to empower its securities authority to address crypto insider trading effectively, aligning these rules with those applicable to traditional stock trading. According to a report from Nikkei Asia, the Securities and Exchange Surveillance Commission (SESC) will be authorized to scrutinize unusual trading activities and impose fines on offenders, proportional to their earnings from insider trading.

Currently, there are no regulations regarding insider trading for cryptocurrencies under the Financial Instruments and Exchange Act. The Japan Virtual and Crypto Assets Exchange Association lacks mechanisms to detect such activities, necessitating enhanced regulatory frameworks in the crypto space.

The Financial Services Agency (FSA), which oversees the SESC, plans to discuss details of the new regulatory framework by the end of 2025 and aims to propose amendments to the FIEA next year.

Due to the difficulty in identifying issuers associated with many tokens, Japanese regulators face challenges in managing insider trading incidents.

The pivot towards effective regulation comes after a significant rise in the number of crypto users in Japan, which has increased fourfold to approximately 7.88 million in the past five years—making up about 6.3% of Japan’s population.

Anticipated Leadership Changes

Sanae Takaichi is projected to become Japan’s next Prime Minister and may introduce a favorable policy environment for tech initiatives, including crypto, while still upholding high regulatory standards. Takaichi has advocated for “technological sovereignty” and enhancements to digital infrastructure, including blockchain technology.

Takaichi’s economic strategies may include lowering interest rates and tax reductions, which could ultimately boost investment inflows into the crypto sector.

Regulatory Framework Under Review

Earlier in September, the FSA expressed intentions to implement new regulations for crypto under the FIEA Act to bolster investor protection and align cryptocurrencies with existing securities laws. This shift aims to tackle prevalent investment problems such as misinformation, unregistered operations, scams, and security challenges related to crypto exchanges.