Japan Rewrites the Rules: Insider Trading Ban on Cryptocurrencies Could Reshape Global Regulation

Japan is preparing to take a historic step that could transform the global approach to crypto regulation.

For the first time, the country is set to ban cryptocurrency trading based on insider or non-public information — a move that could redefine transparency, accountability, and investor confidence worldwide.

Tokyo Moves to Clean Up the Market According to Nikkei Asia, Japan’s Financial Services Agency (FSA) has granted new powers to the Securities and Exchange Surveillance Commission (SESC), allowing it to investigate and prosecute illegal crypto trading, just as it does in traditional securities markets. This expansion of the Financial Instruments and Exchange Act (FIEA) — which previously did not cover digital assets — gives SESC the authority to pursue insider trading cases in crypto and impose penalties or criminal referrals when violations are found. The FSA plans to finalize the framework by the end of the year and submit legislative amendments to parliament in 2026.

From Self-Regulation to State Oversight Until now, Japan’s crypto oversight relied largely on self-regulation through the Japan Virtual and Crypto Asset Exchange Association, which lacked the power to impose binding sanctions or deter insider trading. The new approach marks a major shift — the government is taking control.

The goal: create a transparent and enforceable system that can punish manipulation and protect investors while boosting public trust in the crypto sector. According to Nikkei Asia, Japan had 7.88 million active crypto accounts as of August, more than four times the number five years ago.

Officials believe that greater investor protection could make digital assets as trustworthy as traditional financial markets.

A Message to the World “Japan is setting a new global standard,” said Cessiah Lopez, Head of Policy and Research at Superteam UK.

She believes Japan’s move could pressure the United States and other major economies to clarify their own rules around insider trading in crypto “Insider trading undermines market integrity and erodes trust in the idea of democratized wealth,” Lopez warned.

“Any effort that harmonizes global protections against it should be celebrated.” Lopez noted that U.S. laws on crypto insider trading remain fragmented, as cases are handled individually under existing securities law — resulting in inconsistent enforcement and leaving loopholes that bad actors in decentralized finance can exploit.

Legal Clarity Over Case-by-Case Guesswork According to John Park, Head of Korea at the Arbitrum Foundation, Japan’s move represents a choice for legislative clarity instead of ad-hoc enforcement. “They’ve chosen predictability and coherence,” Park said.

“If the SESC gets the same investigative tools it uses for securities, other jurisdictions will follow Japan’s example.” Park added that Japan’s approach aligns with the EU’s philosophy of harmonized financial legislation, which emphasizes market integrity and investor protection.

He suggested that Brussels and Tokyo are now shaping the global playbook for crypto regulation — one the U.S. may eventually adopt out of competitive necessity.

The Big Question: What Counts as “Inside Information”? Despite progress, one challenge remains — defining what constitutes insider information in decentralized markets.

Unlike traditional finance, where insider knowledge usually involves mergers, acquisitions, or earnings, the crypto ecosystem lacks centralized issuers and formal corporate structures. So who counts as an “insider”?

A developer, a validator, or perhaps a large investor with access to unreleased data?

These questions will need to be resolved before the new framework can be effectively implemented.

A New Era of Trust in Crypto Japan’s decision marks more than just a legal reform — it’s a symbolic turning point showing that the crypto industry is maturing.

After years dominated by speculation and opacity, the market is now moving toward a transparent, rules-based structure, modeled on traditional finance but adapted for the digital age. “This is the beginning of a new era — one where crypto becomes a respected part of the global financial system,” Park concluded.

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