The Japanese cabinet has approved a bill to classify cryptocurrencies as financial instruments.

According to Nikkei, the Japanese government passed an amendment to the Financial Instruments and Exchange Act at a cabinet meeting on the 10th. This amendment, for the first time, regulates crypto assets (virtual currencies) as financial instruments and prohibits insider trading and other activities based on undisclosed information. It also requires cryptocurrency issuers to disclose information annually to improve the market environment. If the bill passes the current Diet session, it is expected to be implemented as early as fiscal year 2027. Previously, the Japanese Financial Services Agency primarily regulated cryptocurrencies based on their use as a means of payment, under the Payment Services Act. However, in recent years, the use of cryptocurrencies as investment tools has increased, thus bringing them under the regulatory framework of the Financial Instruments and Exchange Act. Furthermore, the names of registered institutions will be changed from "crypto asset exchange operators" to "crypto asset trading operators." Penalties will also be strengthened: for unregistered institutions engaging in sales, imprisonment will increase from a maximum of 3 years to a maximum of 10 years, and fines will increase from a maximum of 3 million yen to a maximum of 10 million yen. By increasing penalties, the government aims to further strengthen its stance on investor protection.