Japan’s FSA to Prepare Regulatory Overhaul Banning Insider Trading in Crypto

Japan’s Financial Services Agency (FSA) and the Securities and Exchange Commission Surveillance Commission (SESC) are working to prepare a landmark regulatory overhaul that will ban insider trading in cryptocurrencies.

According to reports, the government will give the SESC the authority to investigate suspicious trades and recommend penalties and criminal charges if trades are based on undisclosed information.

Japan To Enforce Crypto Insider Trading Ban

Japan’s financial regulators are preparing a regulatory overhaul to ban insider trading in cryptocurrencies. The new framework will be enforced in 2026. Under the current framework, insider trading laws in Japan do not apply to cryptocurrencies. According to reports, Japan’s FSA and the SESC plan to amend the Financial Instruments and Exchange Act (FIEA) to classify specified crypto assets as financial instruments. Under the new regulatory framework, trading using undisclosed information will be prohibited for digital assets, just as it is for stocks and securities.

The SESC will also be given the authority to investigate trades it deems suspicious, issue surcharge orders, and refer serious violations for criminal prosecution. Penalties imposed will be tied to gains made from illicit insider trading.

Closing Loopholes

Japan’s cryptocurrency market has registered tremendous growth, with millions of active users. As a result, regulators are facing intense pressure to bring digital assets under stronger regulatory oversight, ensuring transparency and investor protection. Existing insider trading laws in Japan have been insufficient for the digital asset ecosystem, and give traders several loopholes to exploit. The FSA and SESC aim to address these loopholes by drafting clear rules around what constitutes insider information in a decentralized context.

Plans include creating dedicated crypto bureaus within the FSA to oversee and ensure compliance, coordinate audits, and liaise with global frameworks, such as the OECD’s Crypto-Asset Reporting Framework.

Challenges Ahead

However, the exercise faces several challenges. The FSA wants to finalize the regulatory framework by the end of the year and submit the amendment to the legislature in 2026. Implementation of the new framework is expected to follow once the legislature passes it. However, the real challenge lies in enforcement. Defining insiders in decentralized systems, detecting trades driven by privileged information, and attributing liability across borders pose a unique challenge for regulators. Despite the challenges, the move is a significant step toward establishing crypto regulation and bringing it on par with the traditional securities market.

Bridging Innovation And Regulation

When implemented, Japan’s insider trading ban will mark a defining moment for the country’s crypto industry. By extending traditional financial protections to cryptocurrencies, the FSA aims to enhance transparency and investor confidence, while addressing the risk of market manipulation. The move highlights Japan’s determination to integrate the crypto ecosystem with a globally regulated regulatory framework.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice