Japan's Financial Services Agency Details Framework for Transitioning Crypto Assets to the Financial Instruments and Exchange Act

On April 23, Shigeru Shimizu, head of the Risk Analysis Division of the Comprehensive Policy Bureau at Japan’s Financial Services Agency (FSA), revealed that a bill to transfer crypto assets from the Payment Services Act to the Financial Instruments and Exchange Act has been submitted to the extraordinary Diet session. This move aims to enhance user protection, with core measures including the implementation of information disclosure by issuers, the establishment of a new category for ‘crypto asset trading businesses’, increased penalties for unlicensed operators, and strengthened enforcement, as well as the introduction of insider trading regulations and a penalty system.

Additionally, three ongoing empirical experiments from the ‘Payment Innovation Project (PIP)’ initiated by the FSA in November last year include: first, a joint issuance of yen stablecoins involving major banks to verify efficiency in cross-border settlements for large trading companies; second, on-chain securities settlement, which records the transfer of rights for government bonds, stocks, etc., on the blockchain using a transfer system, synchronized with existing laws, and aims for simultaneous delivery of cash and securities through stablecoin payments, targeting 24/7 continuous trading settlement; third, interbank transfer of tokenized deposits, which aims to establish a transfer mechanism for tokenized deposits between different banks, in conjunction with the Bank of Japan’s ‘Central Bank Tokenized Deposit Sandbox Project’.