12-15-2025 
Japan’s Financial Services Agency (FSA), the country’s top financial regulator, on Wednesday released a report that proposes moving digital asset regulation from its current position under the Payment Services Act (PSA) to be governed by the Financial Instruments and Exchange Act (FIEA), which is the regulatory framework for securities markets, issuance, trading, and disclosures.
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“The FIEA is based on the concept of building a comprehensive investor protection framework covering a wide range of highly investment-oriented financial products,” said the FSA. “The fact that many crypto asset transactions are conducted with the expectation of returns from price fluctuations aligns with the investment-oriented consideration of financial products that were discussed when the FIEA was enacted.”
It added that, “crypto transactions conducted by users are similar to securities transactions and may involve the sale of new crypto assets or the buying and selling already in circulation.”
The report is the result of an extensive review of how Japan regulates digital assets, conducted by the Financial System Council’s (FSC) Working Group (the ‘Working Group’) since June. The FSC is the key consultative council that informs and guides FSA policy and regulatory decisions.
The Working Group was set up on June 25 after the government requested a review of the framework surrounding digital assets, one that takes into account “that they are being positioned as investment targets for both domestic and international investors,” while also paying attention to both user protection and the promotion of innovation.
The Group convened six times from July onward to discuss and review the framework surrounding digital assets, and the December 10 report summarizes the results of these discussions.
The review found that, when considering issues around digital assets, they appeared to have “affinity” with the problems traditionally addressed by the FIEA. For this reason, the regulator concluded that “the FIEA’s principles are considered appropriate… to address urgent issues related to crypto assets.”
When it comes to what this proposed change in crypto’s regulatory status will mean in real terms, by bringing certain digital assets and businesses that transact in them under the FIEA, they will be subject to a range of new requirements, not least more stringent data disclosure obligations.
What the new rules may mean
From the perspective of investor protection, the FIEA establishes various business regulations governing mediation, intermediation, investment management, and investment advice related to the buying and selling of securities, as well as requiring the proper management of assets entrusted to customers.
Furthermore, under the FIEA, unfair trade practices are regulated to ensure a fair and transparent market and to protect investors, with criminal penalties and surcharge systems in place to ensure the effectiveness of these regulations.
Among the new requirements that placing digital assets under this regime will impose on them, the proposal mandates that exchanges provide pre-sale disclosures, including detailed information about the core entities behind the offering, and requires code audits by independent third-party experts. It would also place new responsibilities on issuers requiring them to disclose their identities, regardless of whether the project is decentralized, and how tokens are issued and distributed.
The FSA argued that the proposals in the regulatory review would “strengthen regulations and enforcement for the protection of users, which is expected to create an environment where users can carry out transactions with greater confidence, even for payment purposes.”
It added that “moreover, in Japan, regulations related to crypto assets have already been developed ahead of the rest of the world, and it is hoped that this revision will further enhance the soundness of Japan’s crypto asset trading market and make it a more internationally trusted market.”
Despite pitching securities regulation as the appropriate regime for governing digital assets, the FSA stopped short of classifying them as securities.
“Securities under the Financial Instruments and Exchange Act are those that represent legal “rights” to receive profit distribution, such as dividends or interest,” said the FSA. “In this regard, cryptocurrencies generally do not represent any legal rights, nor do they provide for the distribution of profits or residual assets.”
For this reason, the FSA said it is appropriate to categorize them as “a separate regulatory subject under the Act.”The report also outlined that not all digital assets will be regulated under the FIEA.
Which assets are affected?
The FSA clarified that certain ‘tokens’ do not fall under the category of ‘crypto assets’ under the Payment Services Act and, therefore, will not be moved to the FIEA framework.
One example highlighted by the report was non-fungible tokens (NFTs), which it argued are often associated with the provision of some goods or services: “Since the nature of such NFTs varies, careful consideration is required before subjecting them uniformly to financial regulations.”
Stablecoins will also not fall under the FIE, but for a contrary reason. According to the FSA, assets that have the potential to be widely used for remittance and payment purposes, such as stablecoins linked to fiat currency, are more fittingly regulated under the Payment Services Act; therefore, they will not be moved.
The FSA also clarified that the proposed regulatory changes would primarily focus on transactions conducted by domestic exchanges, where it said there is “a high need to ensure user protection and a well-structured trading environment.”
Thus, “the scope of this regulatory revision covers only a portion of global crypto asset trading,” summarized the finance watchdog.
Why the change of heart?
In the report, the FSA said that the purpose of its review into the digital asset rules was to “enhance user protection by establishing regulations for financial products that correspond to the characteristics of crypto assets, in light of the increasing investment in crypto assets and the occurrence of fraudulent investment solicitations.”
This comes amid evidence of a surge in global crypto-related fraud and theft in 2025. In July, blockchain analysis firm Chainalysis published its crypto crime mid-year update, which found that by July of this year over $2.17 billion had already been stolen from cryptocurrency services, “more devastating than the entirety of 2024.”
With such data in mind, the FSA was keen to point out that revising its regulations “does not constitute an endorsement of crypto asset investment.”
However, the regulator did add that, while it is necessary to strengthen regulations to protect users, “care must be taken to ensure that this does not impose an excessive burden on businesses, which could, in turn, compromise user convenience.”
In terms of next steps, the FSA said its publication of the revised regulations would not necessarily be the final product, but rather it would be “appropriately followed up in light of developments in the crypto asset trading market and related businesses.”
It concluded that “continuous regulatory review should be conducted whenever there are gaps or excesses in regulations, taking into account advances in technology and practice.”
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