Japan is taking significant steps to combat insider trading in its burgeoning cryptocurrency markets through new legal amendments. The Financial Services Agency (FSA) is set to introduce stringent penalties aimed at ensuring fair trading practices as digital asset adoption continues to rise across the nation.
Under the proposed regulations, the Securities and Exchange Surveillance Commission (SESC) will gain enhanced powers to investigate and penalize suspicious trading activities. These new rules will extend existing insider trading prohibitions to include crypto assets under the Financial Instruments and Exchange Act (FIEA), marking a pivotal moment for regulatory oversight in Japan’s crypto landscape.
One of the notable components of these amendments is the introduction of a surcharge system linked to illicit gains from unlawful cryptocurrency trading. This framework will empower the SESC to recommend penalty orders and refer significant violations for prosecution, thereby bolstering the legal framework surrounding crypto transactions.
Currently, Japan’s insider trading rules do not encompass cryptocurrency, which has limited the ability of authorities to act against such offenses. However, the new proposal will explicitly outlaw trading based on undisclosed information related to cryptocurrencies. The FSA aims to finalize these regulatory measures by the end of the year, indicating a commitment to formal oversight.
The proposed legislation will provide clarity on what constitutes insider trading within the crypto sphere. For instance, the unauthorized disclosure of sensitive information regarding token listings or system vulnerabilities may now be deemed illegal. This marks a significant advancement toward establishing comprehensive regulations that align with the rapid growth of the cryptocurrency sector.
Identifying who qualifies as an insider in the decentralized crypto market presents a unique challenge for regulators. Unlike traditional stocks, many cryptocurrencies do not have a central issuer, complicating the enforcement of insider trading rules. As such, previous cases of insider trading in the crypto space have largely evaded legal scrutiny in Japan.
Nonetheless, these new regulations are expected to fill existing gaps and enhance enforcement capabilities across all exchanges. The FSA is also planning to issue detailed guidance to clarify the boundaries of insider activities, helping to define non-public information and acceptable conduct within the market.
Self-regulation among exchanges has been the norm, with the Japan Virtual and Crypto Assets Exchange Association (JVCEA) overseeing compliance. However, officials believe that this approach has left potential for misconduct, prompting the need for formalized legislative standards to close these loopholes.
The rise of cryptocurrency ownership in Japan is noteworthy, with approximately 12.41 million crypto holders recorded by May 2025, up from 9.17 million the previous year. Analysts predict this number could surge to 19.43 million by December, reflecting a growing interest in digital assets that is outpacing markets in South Korea, India, and Vietnam.
Moreover, the on-chain transaction value in Japan has witnessed a staggering 120% increase year-over-year by June 2025, further emphasizing the urgent need for robust investor protections and transparent regulations. As the government prepares to submit the proposed amendments during the next parliamentary session, the potential impact on Japan’s cryptocurrency landscape could be profound and far-reaching.
