Japan's FSA Outlines Plan to Move Crypto Assets Under Financial Instruments Law

Japan's Financial Services Agency (FSA) has submitted a bill to the Extraordinary Diet that would shift the regulatory treatment of crypto assets from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA), aiming to bolster investor protection. Speaking at the 9th BCCC Collaborative Day on April 21, Shigeshi Shimizu, head of the Risk Analysis Division at the FSA's General Policy Bureau, said the proposal includes creating a new "cryptocurrency exchange business" category that differentiates operators based on whether token issuers meet disclosure requirements. The package would also raise penalties and tighten enforcement against unlicensed operators, while adding insider-trading rules and a surcharge regime. Shimizu also provided an update on three pilots under the FSA's Payment Infrastructure Modernization Project (PIP), launched in November. The first is a joint issuance of yen-backed stablecoins by major banks and other participants to test efficiency gains in cross-border settlements for large trading companies. The second focuses on on-chain securities settlement, using a transfer framework to record the transfer of rights such as government bonds and equities on a blockchain in line with existing laws, enabling delivery-versus-payment via stablecoins and supporting 24/7 trading and settlement. The third tests tokenized deposit transfers between banks, building an interbank mechanism for moving tokenized deposits and linking it with the Bank of Japan's "Central Bank Demand Deposit Tokenization Sandbox Project."