Japan’s Financial Services Agency (FSA) aims to amend the Financial Instruments and Exchange Act to officially classify crypto assets as financial products.
This amendment would impose insider trading regulations, prohibiting trades based on confidential information.
The FSA is anticipated to submit the proposed bill to parliament in 2026.
Regulator Intent To Tighten Oversight
This development suggests a clear intent from the regulator to align digital asset oversight with the existing framework for conventional securities. By placing crypto assets under the remit of traditional financial instruments, the FSA is setting the stage for tighter controls that mirror those already applied to stocks and bonds. Once implemented, the rule would mean that any trading based on non-public, price-sensitive information could lead to legal consequences—something not currently enforced with the same degree of precision in the digital asset space.
What we see here is an administrative shift pointing towards increased scrutiny of informational advantages. If the proposal reaches parliament in 2026 as expected, and then becomes law, it will reshape how exchanges and institutional participants handle disclosures, communications, and internal processes. The onus will be on them to demonstrate effective barriers inside their operations to prevent unlawful trades.
From our perspective, this isn’t a soft policy signal—it’s a building block towards bridging the gulf between old and new markets. The implication is that anyone with early access to development news, token listings, vulnerabilities, or code-level changes may be considered to hold material non-public information under Japanese law.
Market Response And Compliance Adjustments
For us, this calls for adjusted positioning. On shorter timeframes, less impulsive entries and tighter counterparty controls may be warranted, particularly when locating liquidity or providing leveraged exposure to tokens with fundamental events pending. We also see reduced appeal in longer-dated options or structured products built on assets potentially affected by such regulation—at least until further clarification arrives around the criteria for enforcement.
In procedural terms, once discussions reach Tokyo’s legislature, there’s likely to be a buffer period lasting several quarters. But speculative positioning in connected instruments could shift much earlier.
We believe that wider adoption of conduct rules similar to those seen inside commodities and equities desks will be necessary. Pre-trade checks, blackout windows, and compliance questionnaires won’t simply become optional—they might end up hardcoded into how counterparties screen for acceptable risk. For us, this pivots attention back onto position transparency and time-based liquidity allocation.
