Japan's financial regulatory agency is preparing to shift the regulation of crypto assets from the national payment system to a framework designed specifically for investment and securities markets.
The Financial Services Agency (FSA) released a comprehensive report on Wednesday from the Financial System Council's working group regarding the regulatory status of cryptocurrencies across multiple areas.
The document outlines plans to transition the legal basis for cryptocurrency regulation from the Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA), which is the primary law governing the regulation of securities markets, issuance, trading, and information disclosure.
"Crypto assets are increasingly being used as investment targets both domestically and internationally," the report notes, emphasizing the necessity of protecting users through regulation that treats cryptocurrencies as financial products.
One of the core changes brought about by including cryptocurrencies under the FIEA is the strengthening of data disclosure requirements for Initial Exchange Offerings (IEOs) or token sales managed by crypto exchanges.
"Cryptocurrency transactions conducted by users are similar to securities transactions and may involve the sale of new crypto assets or the buying and selling of already circulating assets," the document emphasizes, highlighting the importance of timely information access during IEO sales.
Under the IEO requirements, the proposal mandates exchanges to provide pre-sale disclosures, including detailed information about the core entities behind the issuance. It also requires independent third-party experts to conduct code audits and encourages consideration of feedback from self-regulatory organizations.
In addition to exchanges, the proposal also imposes accountability requirements on issuers, requiring them to disclose their identities, regardless of whether the project is decentralized, as well as how tokens are issued and distributed.
The proposed framework will also provide regulators with stronger tools to combat unregistered platforms, particularly those from overseas or associated with decentralized exchanges. It includes explicit provisions prohibiting insider trading, echoing the regulations set forth in the EU's Markets in Crypto-Assets (MiCA) framework and South Korean laws.
As this news emerges, the Japanese government is considering reducing the maximum tax rate on cryptocurrency profits by imposing a uniform tax rate of 20% on all profits from cryptocurrency transactions.
On Tuesday, the FSA also expressed caution regarding allowing foreign crypto asset exchange-traded funds' derivatives, reportedly due to their underlying assets being "unpopular."
Related: UK cryptocurrency lobbying group joins digital chamber to promote cross-border policy cooperation
Original article: “Japan Plans Major Shift, Moving Crypto Regulation from Payment Law to Securities Law”
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