Japan's Financial Services Agency makes a major shift in the supervision system for cryptocurrencies

The Financial Services Agency (FSA) of Japan has announced a review of the traditional regulatory framework in response to the rapidly expanding cryptocurrency market. The handling of cryptocurrencies, previously governed under the Payment Services Act (PSA), will be transitioned to fall under the Financial Instruments and Exchange Act (FIEA).

Specific Measures to Strengthen Supervision

This reform includes several stricter regulatory measures. Starting with the expansion of information disclosure rules, the framework for regulation of Initial Exchange Offerings (IEOs) will be established, and enforcement against unregistered platforms will be a key focus.

Exchange operators will be required to disclose detailed information about token issuers in advance. Additionally, an essential requirement is the mandatory conduct of independent third-party code audits before token sales.

Issuers are also expected to enhance transparency by clearly providing their identity information and details of their token distribution mechanisms.

Building a Framework in Line with International Regulatory Trends

The review of cryptocurrency regulations is designed with an awareness of harmonizing with international standards. It considers frameworks such as the EU’s comprehensive cryptocurrency regulation, MiCA, and South Korea’s regulatory framework, while also exploring the introduction of insider trading prohibitions.

These measures demonstrate Japan’s FSA’s emphasis on risk management in response to the growth of the cryptocurrency market, aiming to balance user protection with the healthy development of the market.