Japan is considering changing the classification of cryptocurrencies from a "means of settlement" to financial products according to a report by Nikkei. The aim is to prevent insider trading in the cryptocurrency market.

The country's Financial Services Agency (FSA) is spearheading this move as part of a broader initiative to enhance supervision over Japan's growing crypto sector, which has experienced a surge in both legitimate use and fraudulent activities.

Expected to be submitted to Japan's parliament by 2026, amendments to the Financial Instruments and Exchange Act (FIEA) will follow an in-depth evaluation by experts.

Current regulations categorize cryptocurrencies under the Payment Services Act as a means of settlement, limiting their scope mainly to payment transactions rather than investment opportunities. This adjustment seeks to address loopholes in regulatory control, particularly regarding issues like insider trading.

Japan Mulls Reclassifying Crypto as a ‘Financial Product’ to Curb Insider Trading: Report

Cryptocurrencies are currently categorized as a "means of settlement" under the Payment Services Act, a designation that has governed their use primarily as a payment tool rather than as investment vehicles.

• Japan's Financial Services Agency (FSA) plans to propose reclassifying cryptocurrencies as financial products to curb insider trading in the crypto market.
• This proposal is part of a broader effort to strengthen oversight of Japan's crypto ecosystem, which has seen increased adoption and fraudulent activities.
• The FSA aims to submit amendments to the Financial Instruments and Exchange Act (FIEA) to Japan's parliament as early as 2026, following a detailed review.

Details concerning specific rules on insider trading within the cryptocurrency realm, such as defining what constitutes insider information and the corresponding penalties for breaches, are yet to be fully outlined and are anticipated as the proposal progresses.

The move comes as part of a broader effort to strengthen oversight in Japan's crypto ecosystem, which has witnessed growing adoption alongside a rise in fraudulent activities.

The FSA intends to submit amendments to the Financial Instruments and Exchange Act (FIEA) to Japan's parliament as early as 2026, following a detailed review conducted by experts behind closed doors.

Cryptocurrencies are currently categorized as a "means of settlement" under the Payment Services Act, a designation that has governed their use primarily as a payment tool rather than as investment vehicles.

However, this existing classification has left gaps in regulatory oversight, particularly concerning activities like insider trading.

As such, specific details about the insider trading rules — such as what constitutes insider information in the crypto context or the penalties for violations — have not yet been disclosed, leaving room for further clarification as the proposal takes shape.