Japan Moves to Ban Crypto Insider Trading Under New Rules
- Japan’s FSA plans new laws allowing probes and penalties for crypto insider trading cases.
- The SESC will gain powers to investigate and fine traders using non-public information.
- The framework extends the Financial Instruments and Exchange Act to cover crypto assets.
Japan is on the verge of enacting one of the world’s first explicit legal bans on crypto insider trading. According to Nikkei Asia, the Financial Services Agency (FSA) is planning to create a regulatory framework that will enable the authorities to probe and punish individuals who employ non-public data in digital asset markets. Regulators are seeking to close a legal gap that currently allows insider trading in cryptocurrencies to go unpunished.
FSA to Extend Insider Trading Rules to Crypto
Japan’s Securities and Exchange Surveillance Commission (SESC) will play a central role in enforcing the proposed regulations. The new framework would authorize the SESC to launch investigations into suspicious trading behavior across exchanges and blockchain networks. Traders found guilty of insider trading would face fines linked directly to their illicit profits. In severe cases, the SESC would refer offenders for criminal prosecution.
The Financial Instruments and Exchange Act (FIEA) in Japan currently regulates insider trading of securities, including stocks and bonds, but not cryptocurrencies. This gap has created enforcement challenges, as crypto markets often operate without traditional issuers or corporate disclosures.
The proposed amendments would extend principles of FIEA to crypto assets. The FSA aims to finalize the framework’s structure by the end of 2025 and submit the proposal to parliament in 2026.
Officials acknowledge a key challenge, defining what constitutes insider information in decentralized markets. Most of the tokens are controlled by open-source protocols, making it hard to know who is considered an insider. Regardless, regulators believe that the increasing institutional activity in crypto requires regulation.
Crypto Oversight Strengthens Amid Market Growth
Japan’s push for tighter oversight follows a sharp rise in crypto adoption. The number of local crypto users has quadrupled in the past five years, reaching 7.88 million, about 6.3% of Japan’s population.
Regulators say this expansion has increased the need for formal supervision. The Japan Virtual and Crypto Assets Exchange Association currently oversees exchange operations but lacks tools to detect or penalize insider trading. The new rules would bring Japan’s crypto markets closer to traditional financial regulation standards.
In recent months, the FSA has also suggested moving crypto regulation off the Payments Services Act to the Financial Instruments and Exchange Act. This would make cryptocurrencies more in line with securities, providing stronger protection to investors. The agency indicated that the shift would assist in addressing the problem of false disclosures, unregistered sites and fraudulent schemes.
Japan’s regulatory tightening coincides with a broader wave of institutional integration. Earlier this year, Binance Japan partnered with PayPay to expand digital asset access for Japanese users. The partnership reflects growing corporate confidence in Japan’s maturing crypto framework.
Related: DeFi Dev Corp. and Superteam Japan Partner to Launch DFDV JP
Political Change Could Support Tech-Friendly Policy
Japan’s political landscape could also influence the speed of the regulatory reform. Sanae Takaichi, one of the top contenders to become the next prime minister in Japan, is likely to adopt the pro-technology approach while maintaining rigorous oversight.
Takiichi has been a proponent for “technological sovereignty” and supports the expansion of blockchain infrastructure to enhance Japan’s competitiveness. She also favors low interest rates, tax incentives and policies spearheaded to drive innovation in digital finance and advanced manufacturing.
Analysts believe that her leadership would add a new momentum to the crypto and tech industries in Japan. Regulators, however, remain focused on ensuring that innovation does not overtake investor protection.
If approved, the proposed laws could become a milestone in the evolution of global digital asset governance, placing Japan among the first major economies to treat crypto insider trading as a serious financial offence.
