Japan Moves to Ban Crypto Insider Trading Under New Securities Rules

Financial authorities in Japan are preparing to tighten oversight of the cryptocurrency market by introducing regulations to prohibit and punish insider trading, a move that would bring crypto trading under the same legal framework as traditional securities.

According to a report from Nikkei Asia, the Securities and Exchange Surveillance Commission (SESC) will soon gain the authority to investigate suspicious crypto transactions. Under the proposed rules, traders found guilty of insider activity could face fines proportional to their illicit profits. In more serious cases, the SESC would have the power to make criminal referrals.

Currently, Japan’s Financial Instruments and Exchange Act (FIEA) does not include specific provisions for insider trading in digital assets. The self-regulated Japan Virtual and Crypto Assets Exchange Association (JVCEA) also lacks a robust monitoring system to detect suspicious trades. This regulatory gap has raised concerns about fairness and transparency in the fast-growing crypto market.

Rising Crypto Adoption

The Financial Services Agency (FSA), which oversees the SESC, plans to finalize details of the new framework through a working group by the end of 2025. The goal is to submit an amendment to the FIEA next year, ensuring that digital assets fall under the same legal standards as securities.

Japan’s tightening stance on crypto comes amid a sharp rise in digital asset adoption. The number of domestic crypto users has grown fourfold in the past five years, reaching approximately 7.88 million, around 6.3% of the country’s population.

However, regulators face unique challenges in policing insider trading in the crypto space. Many digital tokens lack identifiable issuers, making it difficult to define who qualifies as an insider. This has limited the country’s ability to prosecute potential misconduct in the past, according to Nikkei Asia.

New Leadership Could Boost Crypto Innovation in Japan

Adding political momentum to these regulatory changes is Sanae Takaichi, who is widely expected to become Japan’s next prime minister. Known for her pro-technology stance, Takaichi has voiced support for “technological sovereignty” and the expansion of digital infrastructure, including blockchain.

Her proposed economic policies, such as lower interest rates, tax reductions, and looser monetary measures, could attract greater investment into Japan’s crypto and tech sectors while maintaining strict compliance standards.

Earlier this year, the Japan FSA also proposed moving crypto regulation from the Payment Services Act to the FIEA. This shift aims to enhance investor protection, address issues like inaccurate disclosures and scams, and align Japan’s crypto market more closely with its traditional financial system.