Japan’s financial regulations are about to get a lot stricter as the authorities are mulling over a fresh set of rules that are intended to make it illegal even more explicitly for insiders to trade cryptocurrencies. According to the report of Nikkei Asia, the Financial Services Agency (FSA) is planning the filing of legal amendments that would make it a punishing offense to trade on non-public information, thus being among the most significant efforts of the country to regulate digital asset markets.
If the regulations are implemented, the violators will have to pay money penalties equivalent to their illicit profits, while the Securities and Exchange Surveillance Commission (SESC) will receive more freedom to examine and follow up on the suspected cases. The changes are designed to enable the SESC to make recommendations about administrative surcharges or criminal prosecutions, thus, a significant step towards treating crypto as traditional securities markets.
The FSA, as cited by Nikkei, intends to come up with the complete proposal by the end of 2025, with the submission of a draft bill during the next year’s regular parliamentary session.
At present, the Financial Instruments and Exchange Act (FIEA) in Japan does not extend its provisions to cryptocurrencies in the case of insider trading, thus putting such activities in a regulatory gray area. Control has been mostly based on industry self-regulation and voluntary compliance from crypto exchanges.
The upcoming law aims to eliminate this loophole and to enhance the integrity of the market in line with the trend of increasing institutional participation in digital assets. Nevertheless, the problem of insider information is still difficult even in conventional markets, now consider crypto, where many tokens do not even have a need for an issuer or a centralized organization. “Who is the insider?” is a big problem for policymakers because the blockchain community is not centralized.
As the crypto sector merges with traditional finance, regulators in Japan have increased their oversight. The move comes after a series of high-profile partnerships and investments in the Japanese market.
Only last week, Binance Japan made known its plan for a capital and business collaboration with PayPay Corporation, the payment giant local exchange acquiring a 40% equity stake in the local exchange. The partnership highlights Japan’s expanding crypto usage, and thus, regulators are prompted to ensure more transparency and investor protection in the rapidly changing digital asset ecosystem.
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