On April 10, the Japanese government approved a bill reclassifying cryptocurrencies as financial instruments under the revised Financial Instruments and Foreign Exchange Act, removing digital assets from the scope of the Payment Services Act, and placing cryptocurrencies in Japan under the same legal rules as stocks and bonds.
Under the amendment, maximum prison terms for unregistered sellers increased from 3 to 10 years, and fines increased from 3 million yen to 10 million yen. Transactions based on undisclosed inside information are now expressly prohibited.
This is not just incremental regulatory improvement, but a structural rebranding supported by strong enforcement tools from day one. The question remains what exactly this measure will change for trading platforms, institutional dealers and the 13 million Japanese residents who already hold cryptocurrency accounts, and whether the compliance timeline is as short as the headline suggests.
- Reclassification in FIEA: Cryptocurrencies are no longer dealt with under the Payment Services Act but are now fully covered by the Financial Instruments and Foreign Exchange Act, along with stocks and bonds.
- Prohibition of insider trading: Crypto assets are now explicitly subject to a trading ban based on material non-public information.
- Escalation of sanctions: Prison sentences for unregistered sellers increased to 10 years and fines to 10 million yen.
- Modification of the LPS law: Japanese venture capital firms can now hold crypto assets directly, removing a structural barrier that pushed startup funding overseas.
- Unification of the tax system: The top tax rate for cryptocurrencies is expected to be reduced from 55% to a flat tax of 20% on capital gains, in line with that for stocks.
- Legalization of Bitcoin funds (ETF): The Financial Services Agency (FSA) is targeting 2028 to approve cryptocurrency ETFs to coincide with these changes.
What does the FIEA crypto classification change for operators and investors?
Under the old framework, cryptocurrencies fell under the Payment Services Act, where they were regulated primarily as a payment mechanism and not as an investment instrument.
This legal pot defined everything: custody standards, disclosure obligations, investor protection and enforcement rigor. The Financial Services Agency’s (FSA) Financial System Board report released in February 2026 was clear on the fundamental problem: it noted that “information asymmetry” between issuers and retail investors has become structurally dangerous as crypto evolves into an investment asset class.
The new bill addresses this problem at the level of legal definition. By bringing crypto under the umbrella of the Financial Instruments and Foreign Exchange Act, issuers are now subject to mandatory annual disclosure requirements covering technology, token supply, risk factors and use cases – even for listed assets that are not actively raising funding.
This is the same disclosure regime under which Japanese equity issuers operate. For the 105 cryptocurrencies identified by the Financial Services Agency for reclassification – including Bitcoin and Ethereum – the compliance space has expanded significantly.
The modification of the LPS law is the part that institutional observers are watching closely. Previously, Japanese venture capital funds structured as limited investment companies were legally prohibited from directly holding crypto assets.
This constraint alone has been silently driving capital away from Web3 startups for years. The amendment removes this barrier, meaning local venture capital can now invest in crypto without the need to restructure through foreign entities. This is not a fringe solution, but rather a structural prerequisite for an effective local crypto venture capital ecosystem.
Finance Minister Satsuki Katayama described the government’s approval as a dual mandate: “expanding the supply of growth capital” while ensuring “market fairness, transparency and investor protection.” There is no conflict between these two goals, as securities-level supervision is exactly what institutional adoption requires.
An April 2026 report from Sandmark Crypto Intelligence found that 42% of global finance professionals cite regulatory uncertainty as a major barrier to allocating crypto investments.
Japan has just removed this barrier at the national level. Weekly XRP flows of $120 million in exchange-traded products (ETPs) recorded in early April show how quickly institutional capital can scale once fiat infrastructure is aligned – and Japan is currently building that same infrastructure at the sovereign level.
Site Position: This is the most significant legislation for crypto regulation in Japan since the amendments to the Payment Services Act following Mt. Gox. Not only does this add rules, but it changes the legal category, which subsequently changes everything.
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