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On April 10, the Japanese government approved a draft law that reclassifies cryptocurrencies as financial instruments under the revised Financial Instruments and Exchange Law, taking digital assets out of the Payment Services Law and placing cryptocurrencies in Japan under the same regulations as stocks and bonds.
Under the reform, prison sentences for unregistered sellers jumped from 3 years to 10 years, and fines increased from 3 million yen to 10 million yen. Trading on anonymous insider information is now prohibited.
This isn’t just an added feature, but a design overhaul that’s been supported by powerful tools since day one. The question remains what exactly this measure will change on the trading platform, allocators organizations, and 13 million Japanese people who are already a cryptocurrency issue, and if the deadline to follow is short as the title suggests.
Key requirements:
- Also classified under FIEA: Cryptocurrencies have moved from being covered under the Payment Services Act to being fully discussed under the Financial Instruments and Exchange Act, on par with stocks and bonds.
- Restricting insider trading: Crypto assets are now clearly regulated by banning trading based on non-public assets.
- Increase in penalty: The prison sentence for unregistered sellers was increased to 10 years, and the fine was increased to 10 million yen.
- Changes to the LPS Act: Japanese companies can own crypto assets directly, removing a barrier that has pushed startups abroad.
- The compatibility of the tax system: The capital tax of crypto should be reduced from 55% to a tax of 20% on capital gains, in line with the investment.
- Eligibility for Bitcoin Funds (ETF): The Financial Services Agency (FSA) is looking to 2028 to approve cryptocurrency ETFs to comply with these changes.
How is the FIEA crypto community changing for employees and investors?
Under the old system, cryptocurrencies fell under the Payment Services Act, where they were regulated primarily as a means of payment and not as an instrument of sale.
This court of law interpreted everything: deposit laws, disclosure requirements, investor protection, and enforcement. The report of the Financial Services Agency’s (FSA) Financial System Board released in February 2026 was aimed at the main problem: it stated that the “information asymmetry” between issuers and traders has become more dangerous as crypto transforms into a financial group.
The new draft law solves this problem at the level of legal interpretation. By bringing crypto under the umbrella of the Financial Instruments and Exchange Act, issuers are now subject to annual disclosure requirements that cover technology, tokens, risks, and use cases — even for listed items that aren’t raising money.
This is the same authority that discloses how Japanese stockbrokers operate. For the 105 cryptocurrencies recognized by the Financial Services Agency for reclassification – including Bitcoin and Ethereum – the space to be followed has grown significantly.
Changes to the LPS Act are an area that regulators are watching closely. Previously, Japanese venture capital funds formed as limited investment partnerships were legally prohibited from directly owning crypto assets.
This one obstacle has been quietly driving Web3 startups for years. The change removes this barrier, meaning that local trading funds can invest in crypto without the need to process through foreign institutions. This is not a minor fix, but it is essential to a healthy crypto venture capital ecosystem.
Finance Minister Satsuki Katayama described the government’s approval as two-fold: “increasing economic growth” and ensuring “market fairness, transparency and investor protection.” There is no conflict between these two goals, because the control of the level of safety is what requires the establishment of institutions.
An April 2026 report by Sandmark Crypto Intelligence found that 42% of global financial experts cited regulatory uncertainty as the biggest obstacle to investing in crypto.
Japan has just removed this barrier from the country. The amount of 120 million dollars per week XRP flows in exchange-traded products (ETPs) recorded at the beginning of April shows how quickly the working capital flows when the fiat instruments are compatible – and Japan is now building the same foundation on an independent scale.
Local authority: This is the most important regulation for crypto regulation in Japan since the amendment of the Payment Services Act following Mt. Gox. They don’t just add laws, they change the body of the law, which changes everything afterwards.
A note Japan classifies digital currencies as financial instruments and expands sanctions appeared for the first time Cryptonews Arabic.
