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Japan’s Financial Services Agency Mulls Crypto Regulation Under FIEA

Japan’s Financial Services Agency Mulls Crypto Regulation Under FIEA

The FSA wants to shift crypto regulation under the FIEA to strengthen investor protection.

Written by Rahul Dhingra, Edited by David Delima | Updated: 5 September 2025 10:05 IST

Japan’s Financial Services Agency Mulls Crypto Regulation Under FIEA

Photo Credit: Unsplash/Illiya Vjestica

Japan’s FSA proposes stricter oversight of cryptocurrencies under securities law.

Highlights

FSA seeks to regulate crypto under stricter securities law
There are over 12 million active crypto accounts in Japan
A new digital asset bureau is planned for FY 2026

In an attempt to protect investors and treat cryptocurrencies like securities, Japan's Financial Services Agency (FSA) has proposed shifting crypto oversight from the Payment Services Act to the stringent Financial Instruments and Exchange Act (FIEA). It was presented as an internal report to the Financial System Council, and it aims to address issues such as improper white papers, inaccurate disclosures, unregistered operations, scams, and security flaws in crypto exchanges. If the proposal is implemented, the government would formally amend legislation to bring crypto under securities-style enforcement.

Japan Plans Dedicated Digital Asset Bureau to Boost Regulation

Although the FSA's briefing is not final, it signals a potential regulatory overhaul if the Financial System Council and government are in agreement. This transition would bring cryptocurrencies under the purview of the FIEA, imposing complete disclosure obligations on issuers for public offerings and secondary distributions, thus reducing information asymmetry between them and investors.

The proposal has been brought forward amid a booming crypto environment in Japan. As per the FSA report, there are over 12 million active users on domestic cryptocurrency exchanges, with total user deposits exceeding JPY 5 trillion (roughly Rs 2.8 lakh crores), nearly one account for every 10 people. Despite this, most retail accounts are low-scale, with 80 percent of accounts holding under $675. Meanwhile, 7.3 percent of traders with investment experience hold crypto. Most of these traders are investing for long-term gains.

Ukraine’s Parliament Backs Draft Law to Legalise, Tax Crypto Sector

The urge for reforms follows after comments by Finance Minister Katsunobu Kato, who acknowledged that crypto assets can serve as an alternative for diversified investments within a proper regulatory framework, despite their volatility.

Meanwhile, the FSA is also exploring broader reforms, including reclassifying crypto as a financial instrument to enable crypto ETFs and potentially applying a 20 percent capital gains tax.

Beyond regulations, Japan plans to reorganise the Financial Services Agency in FY 2026 by creating a dedicated bureau for digital assets, part of a wider push to strengthen governance over crypto and asset management.

These developments indicate a shift in Japan's financial markets toward integrating cryptocurrency, balancing innovation with investor security, and possibly setting a regional benchmark for digital asset regulation.

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Further reading: Japan, Crypto Exchange, Regulations, crypto adoption

Rahul Dhingra

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Rahul Dhingra is a crypto writer at Gadgets 360, where he covers the exciting world of Cryptocurrency, Blockchain, Defi and Web3. Before joining Gadgets 360, he worked as a content specialist for a European-based Crypto Exchange. Rahul loves storytelling, not just through the written word but also through the visual medium. Beyond his professional life, Rahul is a sports fanatic. Whether it’s cricket or football, his passion for the game is contagious. More