Japan steps up crypto regulation by extending insider trading laws to digital assets
Japan is moving to strengthen its financial regulatory landscape by expanding insider trading laws to cover cryptocurrencies — a significant policy shift aimed at reinforcing market integrity and investor protection. The country’s Securities and Exchange Surveillance Commission (SESC), under the jurisdiction of the Financial Services Agency (FSA), will soon be authorized to investigate suspicious crypto trades and impose financial penalties for violations.
Previously, Japan’s insider trading regulations only applied to traditional securities like stocks and bonds. However, the FSA is now preparing to revise the Financial Instruments and Exchange Act (FIEA) to establish a legal foundation for regulating the misuse of non-public information in crypto markets. This amendment is expected to be finalized by the end of the year and officially enacted in 2025.
Under the new framework, the SESC will be empowered to identify and penalize individuals or entities that exploit undisclosed information for personal gain in crypto markets. This move seeks to bring cryptocurrencies under the same regulatory standards that govern conventional financial instruments, thereby closing a critical loophole that has allowed manipulation and opaque practices to persist in the digital asset space.
The expansion of insider trading laws presents a critical step toward legitimizing the crypto industry in Japan. Unlike traditional securities, many digital tokens lack centralized issuers or clear governance structures, making it more challenging to define what exactly constitutes “insider information.” Nevertheless, the FSA’s initiative aligns with global efforts to tighten oversight of digital assets. South Korea and the European Union, for example, have already introduced similar frameworks to combat market manipulation and illegal trading activity.
This regulatory tightening comes at a time when Japan’s crypto market is experiencing rapid growth. According to data from Chainalysis, Japan saw a 120% year-over-year increase in on-chain transaction volume, surpassing neighboring countries such as Indonesia, South Korea, and India. This surge in adoption is being driven by a range of policy reforms, including the introduction of tax revisions for crypto assets, the development of yen-pegged stablecoin frameworks, and the legal recognition of crypto investments.
Despite increased scrutiny, interest in cryptocurrencies remains robust. Tokyo-listed Metaplanet Inc., which started accumulating Bitcoin in April 2024, now holds over 30,000 BTC valued at approximately $3.4 billion. However, the company has faced a sharp decline in market valuation, with its share price plummeting by more than 70% since June. This drop has resulted in the company’s market capitalization falling below the value of its Bitcoin holdings — a rare occurrence that signals investor caution amid broader market volatility. The volatility was heightened further by geopolitical tensions, including recent trade policy statements by former U.S. President Donald Trump.
Metaplanet recently raised $1.4 billion in fresh capital to expand its Bitcoin portfolio, demonstrating continued institutional interest in crypto assets despite regulatory headwinds. Analysts suggest that while short-term price fluctuations remain a risk, the long-term outlook for digital assets in regulated environments like Japan is becoming increasingly attractive to investors seeking transparency and legal clarity.
Japan’s renewed focus on regulation also reflects a broader global divergence in how countries are approaching cryptocurrency governance. While some nations are embracing digital assets as a means of financial innovation, others are adopting restrictive measures to mitigate perceived risks such as fraud, money laundering, and systemic instability. Japan’s balanced approach — tightening rules while encouraging innovation — may serve as a model for other jurisdictions navigating similar challenges.
The decision to bring digital assets under insider trading laws is also likely to influence how crypto companies operate in Japan. Exchanges and token issuers may need to implement stricter internal controls, compliance training, and disclosure practices to avoid regulatory violations. This could lead to an increased demand for legal and compliance professionals within the crypto ecosystem and further institutionalization of the sector.
Moreover, the changes could impact how decentralized finance (DeFi) platforms are treated under Japanese law. With no central authority to hold accountable, DeFi ecosystems pose unique challenges to regulators. However, by establishing a legal standard for insider trading, Japan may be laying the groundwork for future rules governing decentralized protocols — a development that could reshape the global DeFi landscape.
In addition to legal reforms, Japan is also investing in the development of blockchain infrastructure and digital asset custody solutions. This includes pilot programs for central bank digital currencies (CBDCs), as well as public-private partnerships aimed at enhancing blockchain interoperability and security. These initiatives are designed to create a supportive environment for digital finance while ensuring compliance with international regulatory norms, such as FATF guidelines on anti-money laundering.
Looking ahead, industry experts believe that these regulatory developments may lead to greater foreign investment in Japan’s crypto sector. The combination of legal clarity, strong consumer protections, and a growing user base makes the country an increasingly attractive destination for blockchain startups and institutional investors alike.
In conclusion, Japan’s decision to extend insider trading laws to cover cryptocurrencies represents a pivotal moment for the country’s digital asset landscape. By reinforcing oversight and aligning crypto regulations with traditional financial markets, Japan is not only addressing systemic risks but also laying the foundation for sustainable growth in the blockchain economy. As the legal framework evolves, stakeholders across the industry — from traders and developers to regulators and investors — will need to adapt to a more mature and accountable financial environment.