Japan is preparing to enforce stricter oversight of its cryptocurrency industry by outlawing insider trading, marking a major step toward regulating digital assets like traditional securities. The Financial Services Agency (FSA) and the Securities and Exchange Surveillance Commission (SESC) are leading the initiative, which is expected to take effect by 2026.
Under the proposed law, trading cryptocurrencies using confidential or non-public information will be treated as a criminal offence. According to a report by Nikkei Asia, the SESC will have the authority to investigate such cases, levy fines, and refer severe violations for prosecution. Those found guilty may face heavy penalties and be forced to return illicit profits, mirroring Japan’s enforcement practices for stock and securities trading.
Defining Insider Trading in Crypto
To provide clarity, the FSA plans to set up a specialized working group before the end of this year to define what constitutes insider trading in the crypto sector. Likely examples include trading tokens before their public listing or exploiting undisclosed security vulnerabilities for profit.In addition, crypto exchanges in Japan will be required to strengthen compliance frameworks, adopt transparent trading systems, and establish stricter internal controls to prevent misuse of privileged data.
Japan’s crypto market has expanded rapidly, with more than 7.8 million active trading accounts recorded as of August 2025—nearly four times the figure from five years ago. With this growth, regulators are emphasizing the need for transparency, fairness, and investor protection.
At present, most oversight relies on self-regulation through the Japan Virtual and Crypto Assets Exchange Association. The new reforms will shift regulatory authority from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA), aligning crypto assets with conventional financial instruments.
The move aims to align Japan’s approach with global standards as regulators in the U.S. and Europe increase scrutiny over crypto market manipulation. Tokyo’s decision reflects a broader effort to create a transparent, credible, and secure digital asset environment that encourages innovation while protecting investors.
