The government of Japan has started to write legislation that would outlaw insider trading in cryptocurrencies. This aims to subject the sector to the same regulatory scrutiny as stocks and other financial markets.
The goal of the reform is to propose an update to the Financial Instruments and Exchange Act (FIEA) in 2026. Additionally, it covers its coordination by the Securities and Exchange Surveillance Commission (SESC) and the Financial Services Agency (FSA).
Japan Authorities Take Action Against Unfair Market Practices
The new regulations would make it illegal to conduct cryptocurrency transactions based on secret or unreported information. The SESC receives new authority to look into questionable trading practices and levy penalties based on the money made from infractions.
The organisation will refer criminal prosecution of criminals in extreme circumstances. Mirroring Japan’s structure for traditional financial markets, the plan creates a “surcharge” system in which penalties rise in direct proportion to the economic advantage gained.
The Payment Services Act, which currently governs cryptocurrency in Japan, has no anti-insider trading rules. Certain exchanges and project insiders have been able to take advantage of listing information, exchange breaches, or protocol modifications. This is prior to public exposure because these safeguards are in place.
The Japan Virtual and Crypto Assets Exchange Association (JVCEA), Japan’s self-regulatory organisation, has had difficulty filling these holes. This is due to a lack of enforcement and investigation powers.
The FSA Strategy for Implementing the Regulations
By defining insider dealing in digital assets expressly in the FIEA, the FSA hopes to harmonise cryptocurrency regulation with more general securities legislation. The legal draft may be completed by the end of 2025 and presented in the next legislative session.
After passing, the law will provide authorities with the ability to monitor protocols, exchanges, and potentially even decentralised networks that are active in Japan. The new regulations would mandate that exchanges set up automated monitoring systems. This would assist in identifying patterns of insider trading.
Once operating in a grey area, cryptocurrency insiders will now face the same legal repercussions as traditional market manipulation, as Japan tightens its monitoring.
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