Japan is preparing to outlaw insider trading in cryptocurrencies by introducing a surcharge regime, where violators would pay penalties tied to illicit gains. Nikkei reported Wednesday that the Securities and Exchange Surveillance Commission (SESC) will gain powers to probe suspicious crypto trades. Under the plan, it can recommend surcharge orders and refer serious violations for criminal prosecution. This marks a major shift, as insider trading rules under the Financial Instruments and Exchange Act currently do not apply to cryptocurrencies. The Financial Services Agency, which oversees the SESC, plans to finalize the rules through a working group by the end of the year. After that, it aims to submit amendments to the Financial Instruments and Exchange Act during the next regular parliamentary session. Japan Moves Toward Stricter Crypto Oversight Beyond Industry Self-Regulation Currently, exchanges and the Japan Virtual and Crypto Assets Exchange Association (JVCEA) are expected to self-regulate. However, critics note that the transaction monitoring system remains inadequate, leaving room for unfair practices. Under the proposed framework, the FIEA will clearly ban trading cryptocurrencies based on nonpublic or undisclosed information. Next, the FSA will issue detailed guidelines to explain which behaviors fall under this rule. For example, it may cover trades made using private knowledge about a token’s upcoming listing. Similarly, acting on information about an exchange’s security flaw before it becomes public would also likely count as a violation. Defining Crypto Insiders Remains Complex As Many Tokens Lack Clear Issuers Japan faces a distinct challenge as many cryptocurrencies lack a clear issuer, making it difficult to determine who qualifies as an insider. This ambiguity has kept enforcement in crypto largely untested compared with traditional securities. In Asia, the push for clearer rules around digital assets has gained momentum. Japan now stands out, having recorded on-chain value received growth of 120% year-on-year as of June 2025, outpacing South Korea, India and Vietnam. Forecasts Point To 19M Japanese Crypto Holders By Year-End Crypto adoption in Japan is rising fast. As of May 2025, about 12.41m Japanese owned cryptocurrencies. That’s roughly 15% of adults, up from 9.17m the previous year. Meanwhile, forecasts suggest the number could reach 19.43m by year’s end. Clearer regulations and growing institutional participation are driving this growth. As a result, pressure is mounting on the government to act. Policymakers now face the task of shaping rules that balance innovation with investor protection. If successful, a transparent and trustworthy regulatory framework could help crypto shed its image as a risky frontier and evolve into a credible investment class in JapanJapan is preparing to outlaw insider trading in cryptocurrencies by introducing a surcharge regime, where violators would pay penalties tied to illicit gains. Nikkei reported Wednesday that the Securities and Exchange Surveillance Commission (SESC) will gain powers to probe suspicious crypto trades. Under the plan, it can recommend surcharge orders and refer serious violations for criminal prosecution. This marks a major shift, as insider trading rules under the Financial Instruments and Exchange Act currently do not apply to cryptocurrencies. The Financial Services Agency, which oversees the SESC, plans to finalize the rules through a working group by the end of the year. After that, it aims to submit amendments to the Financial Instruments and Exchange Act during the next regular parliamentary session. Japan Moves Toward Stricter Crypto Oversight Beyond Industry Self-Regulation Currently, exchanges and the Japan Virtual and Crypto Assets Exchange Association (JVCEA) are expected to self-regulate. However, critics note that the transaction monitoring system remains inadequate, leaving room for unfair practices. Under the proposed framework, the FIEA will clearly ban trading cryptocurrencies based on nonpublic or undisclosed information. Next, the FSA will issue detailed guidelines to explain which behaviors fall under this rule. For example, it may cover trades made using private knowledge about a token’s upcoming listing. Similarly, acting on information about an exchange’s security flaw before it becomes public would also likely count as a violation. Defining Crypto Insiders Remains Complex As Many Tokens Lack Clear Issuers Japan faces a distinct challenge as many cryptocurrencies lack a clear issuer, making it difficult to determine who qualifies as an insider. This ambiguity has kept enforcement in crypto largely untested compared with traditional securities. In Asia, the push for clearer rules around digital assets has gained momentum. Japan now stands out, having recorded on-chain value received growth of 120% year-on-year as of June 2025, outpacing South Korea, India and Vietnam. Forecasts Point To 19M Japanese Crypto Holders By Year-End Crypto adoption in Japan is rising fast. As of May 2025, about 12.41m Japanese owned cryptocurrencies. That’s roughly 15% of adults, up from 9.17m the previous year. Meanwhile, forecasts suggest the number could reach 19.43m by year’s end. Clearer regulations and growing institutional participation are driving this growth. As a result, pressure is mounting on the government to act. Policymakers now face the task of shaping rules that balance innovation with investor protection. If successful, a transparent and trustworthy regulatory framework could help crypto shed its image as a risky frontier and evolve into a credible investment class in Japan