11-4-2025 – Japan’s Financial Services Agency (FSA) has drafted a comprehensive proposal that fundamentally reimagines the regulation of digital assets. The framework, open for public consultation until 10 May 2025, introduces a novel bifurcated approach to cryptocurrency governance.
At the heart of the proposal lies a sophisticated distinction between established cryptocurrencies and emerging digital tokens. The latter, classified as Type 1 assets, encompasses fundraising instruments and utility tokens from nascent ventures. These will face heightened scrutiny, with issuers required to furnish detailed documentation regarding fund allocation, project trajectories, and associated investment risks.
The regulatory body acknowledges the challenge of direct issuer oversight for Type 1 assets, citing the inherent complexity in pinpointing specific issuers. However, the FSA emphasises the paramount importance of addressing information disparities between project creators and investors.
In contrast, Type 2 assets, which include well-established cryptocurrencies like Bitcoin and Ethereum, will primarily be regulated through exchange platforms. These intermediaries will shoulder new responsibilities, including mandatory reporting of significant market movements that could influence trading patterns.
This regulatory overhaul reflects Japan’s evolving stance towards digital assets, marking a departure from its traditionally conservative approach. The nation’s financial authorities are contemplating lifting restrictions on cryptocurrency ETFs, while simultaneously working towards a landmark revision of the Financial Instruments and Exchange Act by 2026.
The proposed framework addresses crucial aspects of market conduct, entry requirements, and insider trading prevention, though notably excludes tax considerations. This reform positions Japan at the forefront of progressive cryptocurrency regulation, recognising digital assets as a distinct financial instrument rather than merely a payment mechanism.
The FSA’s initiative demonstrates a balanced approach between fostering innovation and ensuring market stability, with provisions for continuous review based on public feedback and international regulatory developments. For Type 1 assets that achieve substantial market penetration, the framework includes potential reclassification under security token regulations.
