Japan Cracks Down on Crypto with Standalone Regulatory Division

Japan has taken a significant step in regulating its digital asset market by creating a standalone division within the Financial Services Agency (FSA) to oversee cryptocurrencies and stablecoins. The new division, which took effect on August 7, replaces several office-level units that previously handled cryptocurrency policy, monitoring, and innovation.

The revised financial law treats crypto assets as financial instruments, subjecting them to regulations similar to traditional securities markets. This includes stricter penalties for unregistered businesses operating in Japan, with maximum prison terms rising from three years to ten years and fines increasing from 3 million yen to 10 million yen.

The new division will be responsible for supervising exchanges, innovation, and digital payments, with three specialized offices managing different policy areas. The Cryptocurrency Monitoring Office will oversee registered service providers, while the two other offices will focus on innovation policy and digital payment planning.

Japan is also working on a separate tax structure for cryptocurrency gains, which includes a 20% effective rate and a three-year loss carry-forward deduction. Regulators are reviewing investment trust rules to support domestic Bitcoin exchange-traded funds (ETFs).