Japan is overhauling the crypto market: new law puts investors first

The Japanese financial regulator FSA has given the green light for a fundamental reform of crypto regulation. Crypto assets are now subject to the Financial Instruments and Exchange Act (FIEA), which puts investor protection at the center. What do the changes mean?

New obligations for exchanges and token issuers

The change affects more than 13 million Japanese crypto accounts, accounting for more than 5 trillion yen (27 billion euros) in assets. The switch from the Payment Services Act to the FIEA places stricter requirements on exchanges, token issuers and non-registered providers.

The transition means that crypto assets will now be treated as investment products, comparable to shares and bonds. Exchanges must maintain liability reserves to cover in case of damage from hacks or unauthorized transactions. In addition, stricter rules apply for fair trading practices and transparency.

According to a report from the FSA, exchanges and providers must meet standardized transparency requirements. Token issuers must provide information on tokenomics, governance and technical risks, among other things. The FSA wants to combat fraudulent projects and better supervise domestic and foreign market parties.

Extra attention will also be paid to decentralized exchanges (DEXs) and the FSA wants to take stricter action against foreign providers that target Japanese investors without registration.

Concerns about compliance pressure and impact on the sector

Crypto organizations in Japan are raising concerns about the feasibility of the new rules. The chairman of the Japanese Blockchain Association warns that the sector may not be able to survive under current plans.

In addition, experts point out legal implications. For example, the new legislation may give the impression to investors that crypto assets are by definition safe, or that there are certain guarantees. But the technical risks, such as the loss of private keys, remain.

Still, the law could spur more crypto adoption in Japan. With one of the world’s largest private wealth reserves, Japan can even play a key role in the institutional adoption of crypto. However, the law will still have to wait a while. The bill is expected to be introduced in the Japanese parliament in 2026.