The suggested reforms would subject cryptocurrencies to insider trading laws, similar to the machinery of financial products such as shares and bonds. People who have inside information about a cryptocurrency can’t use this information to make a big profit by trading the cryptocurrency. Japan isn’t looking at classifying cryptocurrencies as securities, but they will be grouped into a new category that will bring stricter oversight.
Once the rules are settled, such as exchanges, businesses dealing in cryptocurrency will be required to register with FSA. Japan aims to grow transparency and safety in the crypto space to crack down on fraud, scams, and market manipulation. Japan has yet to clarify how it will enforce these rules on foreign platforms conducting business within its boundaries.
The FSA is worried about scams in crypto spaces and wants to put stronger rules in place to prevent this issue. Japan has been at the forefront of cryptocurrency policies for a long time, and if it sets this rule, it might set the rules for other countries, too.
Many millions of crypto investors are already in Japan, and many exchanges operate in the same country; hence, this classification could have far-reaching impacts on the industry. Greater trust could further encourage institutional players to join the industry. It also guarantees more protection for common investors, meaning less risk for them in this rapidly evolving new industry.
Japan is recognizing crypto as a financial product by verifying and regulating it. It is a good step, as it will encourage innovation while ensuring accountability.
