Japan to fully revamp cryptocurrency regulation…pursuing regulation under the Financial Instruments and Exchange Act

Japan is pursuing a plan to change cryptocurrency regulation from the existing Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA).

The Financial System Council under the Financial Services Agency (FSA) released a comprehensive report on the country's cryptocurrency regulatory status on the 10th (local time). The report includes a plan to change the legal basis for cryptocurrency regulation from the existing Payment Services Act to the Financial Instruments and Exchange Act. The Financial Instruments and Exchange Act is a law that regulates securities markets, issuance, trading, and disclosure.

The reason the FSA wants to change the legal basis is that it judges cryptocurrencies should be treated as 'financial instruments.' The FSA said in the report, "Cryptocurrencies are increasingly being used as investment targets domestically and internationally," and "cryptocurrency trading is similar to securities trading."

The report also includes measures to strengthen initial exchange offering (IEO) requirements. Specifically, the report would require exchanges to mandate prior disclosure that includes detailed information about the key issuing entities of tokens for which the exchange leads the offering. It also recommends code audits by independent third-party experts and soliciting opinions from self-regulatory organizations.

It also included a prohibition on insider trading. Cointelegraph said, "(the provision) reflects the EU's MiCA legislation and Korea's regulations," and "this report will provide Japanese regulators with a powerful means to crack down on platforms operated overseas or associated with decentralized exchanges (DEXs)."