Japan Cracks Down on Crypto Insider Trading

Japan is taking a firm stance against insider trading in the cryptocurrency market. New rules are being developed to introduce penalties tied directly to profits gained from illicit trading activities.

Stricter Oversight Incoming

The Securities and Exchange Surveillance Commission (SESC) will gain increased authority to investigate suspicious crypto transactions. They will be able to recommend penalties and pursue criminal prosecution for serious violations.

This is a significant change because current insider trading laws under the Financial Instruments and Exchange Act (FIEA) don't cover cryptocurrencies.

The Financial Services Agency (FSA) plans to finalize these rules by the end of the year and propose amendments to the FIEA in the next parliamentary session.

Addressing Loopholes in Self-Regulation

Currently, crypto exchanges and the Japan Virtual and Crypto Assets Exchange Association (JVCEA) handle self-regulation. Critics have pointed out that the existing transaction monitoring is inadequate.

The proposed FIEA amendments will specifically prohibit trading cryptocurrencies based on non-public information. The FSA will also issue detailed guidelines to clarify what behaviors constitute a violation.

Examples of violations include:

• Trading on private knowledge of an upcoming token listing.
• Acting on information about an exchange's security vulnerability before it's made public.

Challenges in Defining Crypto Insiders

A unique challenge in the crypto space is the lack of a clear issuer for many tokens. This makes it difficult to identify who qualifies as an insider.

Crypto Adoption on the Rise

Japan is experiencing rapid growth in crypto adoption. As of May 2025, approximately 12.41 million Japanese individuals owned cryptocurrencies, representing about 15% of the adult population. Forecasts indicate that this number could reach 19.43 million by the end of the year. This growth is being fueled by clearer regulations and increased institutional participation.

Key Takeaways

• Japan is implementing stricter regulations to combat insider trading in cryptocurrencies.
• The SESC will gain more power to investigate and penalize violations.
• The new rules aim to protect investors and promote a more transparent and trustworthy crypto market.
• Increased regulatory clarity may contribute to the further adoption of cryptocurrencies in Japan.