Japan's regulatory system for cryptoassets is at a major turning point.
The Cryptoassets System Working Group (WG), established within the Financial System Council, has indicated a direction for gradually shifting cryptoassets from the previous framework centered on the Payment Services Act to one based on the Financial Instruments and Exchange Act (FIEA).
This is an attempt to redefine cryptoassets as "part of financial infrastructure" rather than just a "payment method," and is a move that symbolizes the maturation of the Japanese market.
This discussion is not simply about strengthening regulations, but may also be seen as the result of addressing a more fundamental question: how to balance user protection with market soundness as the cryptoassets market expands and becomes more of an investment target.
Since the amendment of the Payment Services Act in 2017, Japan's cryptocurrency regulations have been described as "the strictest in the world," but the system has been developed with safety as its core. However, as the market expands, cryptocurrencies are increasingly being used in the context of investment and asset formation rather than for payment purposes.
Issues that the previous framework cannot adequately address have become apparent, such as price fluctuation risks, unfair trading, the spread of misinformation, and even insider trading. In light of this situation, there is an increasing need to organize cryptocurrencies under rules similar to those of securities markets, and this is gradually being resolved with the transition to the Financial Instruments and Exchange Act model.