- Japan FSA plans to classify crypto assets into two groups to improve oversight and regulatory clarity.
- The new framework will apply stricter rules to fundraising tokens and general disclosure practices.
- Japan may align crypto with securities laws by 2026 to reduce insider trading and market abuse.
Japan’s Financial Services Agency (FSA) released a detailed discussion paper on April 10. The paper aims to reshape the regulatory structure for crypto assets. The agency has invited public feedback until May 10.
The document outlines several regulatory challenges in the digital asset space. These include transparency rules, oversight limits, insider trading prevention, market entry requirements, and rules on staking and the travel rule.
Two-Tier Crypto Asset Classification Introduced
A key highlight of the paper is the introduction of a two-tier classification system for crypto assets. The FSA proposes to divide crypto into Funding/Business and Non-Funding/Non-Business categories.
Funding or Business Crypto Assets fall under Type 1. These include digital assets used to raise capital for projects. Tokens issued to support business models or development plans are included in this group.
Type 2 includes Non-Funding or Non-Business Crypto Assets. These assets do not serve fundraising or business-related functions. Major tokens including Bitcoin and Ethereum fall under this classification.
The regulatory approach establishes market transparency while reducing the regulatory complexity that arises with the expanding crypto market. This approach allows regulators to distinguish between project-oriented digital tokens and broad crypto assets.
Disclosure Rules and Enforcement Remain a Focus
The agency identified concerns with Type 1 assets, particularly around the disclosure of project details. It noted a significant information gap between issuers and users. The FSA sees the need for clearer rules on fund usage and project updates.
For Type 2 assets, enforcement remains complex. Many of these tokens do not have a specific issuer, which complicates the application of disclosure requirements. The agency acknowledges that traditional enforcement methods may not apply effectively.
Regulatory Reform Timeline Set for 2026
Japan’s FSA also confirmed its plan to submit a new crypto bill by 2026. The proposed bill will amend existing legislation and bring cryptocurrencies closer to traditional financial regulations.
If approved, the law would align digital assets with securities under Japan’s legal framework. This shift would subject crypto to insider trading regulations and greater compliance requirements.
Until now, crypto assets have operated under a separate set of rules. The proposed changes aim to close regulatory gaps and improve market transparency. The FSA continues to review public input and plans to use the feedback to shape the final proposal.
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