Japan’s top financial watchdog is preparing to introduce new regulations that would outlaw insider trading in cryptocurrency markets.
According to a report by Nikkei Asia, the Securities and Exchange Surveillance Commission (SESC) may soon have the legal authority to investigate suspicious cryptocurrency transactions. It will also impose fines on offenders and refer severe violations for criminal prosecution.
The move aims to close a significant regulatory gap that has allowed insider trading to go largely unchecked in Japan’s fast-growing cryptocurrency sector.
Expanding Oversight Powers
Currently, Japan’s Financial Instruments and Exchange Act (FIEA), the primary law governing securities, does not cover digital assets such as cryptocurrencies.
Moreover, the Japan Virtual and Crypto Assets Exchange Association (JVCEA), which oversees exchanges under a self-regulatory model, also lacks a strong system to detect insider activity.
Under the new proposal, the SESC would gain powers similar to those it uses in cases of stock market misconduct. Specifically, penalties would depend on the scale of illicit profits, while serious cases could lead to criminal charges.
New Framework Expected by 2025
Meanwhile, Japan’s financial watchdog, which supervises the SESC, expects to finalize the regulatory framework in late 2025. Once complete, the agency plans to submit proposed revisions to the FIEA to parliament in 2026.
This effort follows growing concern over weak market surveillance and the rapid rise of crypto trading in Japan.
Notably, the country has seen its number of registered crypto users increase fourfold over the past five years. It now stands at 7.88 million people, or roughly 6.3% of the population, according to Nikkei Asia.
Enforcement Challenges
Despite stronger oversight plans, regulators acknowledge that enforcement is still challenging.
For instance, many digital tokens are not issued by a specific entity or managed by a central authority, which complicates the identification of who might be considered an “insider”.
This structural difference from traditional securities poses a challenge for crafting enforceable insider trading rules in digital asset markets.
Political Shift May Encourage Innovation
The regulatory push comes as Sanae Takaichi, expected to become Japan’s next prime minister, signals a more innovation-friendly approach to technology.
Takaichi has publicly supported “technological sovereignty” and aims to expand Japan’s digital infrastructure, including blockchain technology.
Her administration is expected to maintain strict compliance standards. Yet her broader economic stance, which favors lower interest rates, tax cuts, and easier monetary policy, could encourage greater investment in the Japanese crypto industry.
Integrating Crypto Under Securities Law
In September 2025, the FSA proposed bringing cryptocurrencies fully under the FIEA, shifting authority from the Payment Services Act. This change, the agency explained, would strengthen investor protection and align crypto assets more closely with securities.
Finally, the agency emphasized that the transition seeks to address recurring issues affecting the market. These include misleading disclosures, unregistered platforms, scams, and cybersecurity risks associated with crypto exchanges.
DisClamier: This content is informational and should not be considered financial advice. The views expressed in this article may include the author's personal opinions and do not reflect The Crypto Basic opinion. Readers are encouraged to do thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
