CITIZENS NEWS

Japan moves to crack down on crypto insider trading

By ramontomeydw // 2025-10-16

• Japan is banning crypto insider trading by extending its Financial Instruments and Exchange Act (FIEA) to explicitly prohibit trading on undisclosed information, aligning cryptocurrency oversight with that of traditional stocks and bonds.
• New powers are being granted to regulators, specifically the Securities and Exchange Surveillance Commission (SESC), to investigate suspicious crypto transactions and levy fines, moving beyond the previous system of self-regulation.
• The move addresses a critical regulatory gap that existed because insider trading rules did not previously cover cryptocurrencies, leaving investors vulnerable to abuses like trading on advance knowledge of a token listing or a security flaw.
• The reclassification is a significant step that shifts crypto regulation from the Payment Services Act to the FIEA, fundamentally recategorizing digital assets as investment vehicles and prioritizing market transparency and investor protection.
• This action is part of a global trend and is driven by a massive surge in Japanese crypto adoption; the country's framework is being watched as a potential model for other nations seeking to balance innovation with a fair market.

In a significant move to legitimize digital currencies, Japan's financial authorities are preparing to impose a strict ban on insider trading within cryptocurrency markets – aligning the nascent asset class with the rigorous oversight long applied to traditional stocks and bonds. The country's Securities and Exchange Surveillance Commission (SESC) is set to gain new powers to investigate suspicious crypto transactions and levy fines based on illicit profits, a direct response to the fourfold surge in Japanese crypto users over the past five years, which now totals nearly 7.9 million individuals. This regulatory push is spearheaded by the SESC's parent organization, the Japanese Financial Services Agency (FSA). As part of this push, the FSA aims to submit proposed amendments to the Financial Instruments and Exchange Act (FIEA) during next year's parliamentary session, marking a pivotal step in the maturation of the country's digital asset landscape. The initiative addresses a critical gap in Japan's financial law. Until now, insider trading rules under the FIEA have not covered cryptocurrencies – leaving monitoring largely to self-regulation by exchanges and the Japan Virtual and Crypto Assets Exchange Association, a system widely criticized as insufficient. The new framework will first explicitly prohibit trading cryptocurrencies based on undisclosed information within the FIEA. Following that, the FSA will issue detailed guidelines outlining specific prohibited conduct. Examples likely to be covered include executing trades with advance knowledge of a token's upcoming listing on a major exchange, or acting on information about a critical security vulnerability before it is publicly disclosed.

Crypto insider trading ban signals new era of regulation

This regulatory journey, however, is fraught with unique challenges not present in traditional finance. BrightU.AI's Enoch engine points out that "regulating cryptocurrency is challenging due to the tension between maintaining user accessibility and enforcing strict security measures, which often leads to inconsistent policies that frustrate users. As compliance requirements tighten, platforms risk alienating high-value transactions while struggling to balance innovation with regulatory demands." Japanese regulators have limited experience with crypto insider trading cases partly because numerous tokens lack an identifiable issuer, making it exceptionally difficult to determine who qualifies as an "insider" with a duty to refrain from trading. Defining the specific types of nonpublic information that significantly affect cryptocurrency prices is also more complex than for stocks, where rules clearly cover events like mergers or natural disaster impacts. The global context for this action is a growing consensus among international regulators on the need to curb market abuse in digital assets. The International Organization of Securities Commissions urged a worldwide crackdown on such activities in 2023, with the European Union and South Korea leading the way in codifying regulations. Japan's own push coincides with a dramatic rise in local adoption. Recent data suggests cryptocurrency ownership in the Land of the Rising Sun could reach 19.43 million by the end of this year, a staggering increase driven by clearer regulations and growing institutional participation. This rapid growth has intensified pressure on policymakers to create a framework that protects investors without stifling innovation. By moving crypto regulation from the Payment Services Act to the FIEA, Japan is fundamentally recategorizing these assets, emphasizing their role as investment vehicles and prioritizing market transparency and investor protection. As Japan navigates the complex task of defining and enforcing these new rules, its actions are being closely watched as a potential model for other nations seeking to integrate digital assets into a well-regulated financial ecosystem, balancing the promise of technological innovation with the imperative of a fair and orderly market. Watch Kevin Johnston advising viewers not to report their crypto earnings to the Canada Revenue Agency below. This video is from the KevinJJohnston channel on Brighteon.com. Sources include: CoinTelegraph.com Asia.Nikkei.com CryptoNews.com BrightU.ai Brighteon.com

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