Japan is preparing to outlaw insider trading in cryptocurrencies by introducing a surcharge system in which violators will pay fines for illegal profits.
The Nikkei Shimbun reported on Wednesday that the Securities and Exchange Surveillance Commission (SESC) will gain authority to investigate suspicious virtual currency transactions.
The plan could recommend surcharge orders or bring criminal prosecutions for serious violations. This is a major change, as insider trading regulations under the Financial Instruments and Exchange Act currently do not apply to virtual currencies.
The Financial Services Agency, which has jurisdiction over the Securities Surveillance Commission, plans to finalize the rules by the end of the year through a working group. After that, the government will aim to submit a bill to revise the Financial Instruments and Exchange Act to the next regular session of the Diet.
Japan moves beyond industry self-regulation towards stricter cryptocurrency oversight
At present, it is expected that exchanges and the Japan Crypto Asset Exchange Association (JVCEA) will self-regulate. But critics say transaction monitoring systems remain inadequate, leaving room for unfair practices.
Under the proposed framework, the FIEA would explicitly prohibit trading in virtual currencies based on non-public or non-public information.
The Financial Services Agency will then issue detailed guidelines explaining which activities fall under this rule. For example, transactions made using non-public knowledge about the token’s future listing may be covered. Similarly, acting on information about security flaws in an exchange before it is made public is also considered a violation.
The definition of a cryptocurrency insider remains complex as many tokens do not have a clear issuer.
Japan faces a distinct challenge as many cryptocurrencies do not have a clear issuer, making it difficult to determine who qualifies as an insider. Due to this ambiguity, execution of cryptocurrencies is largely untested compared to traditional securities.
A movement for clearer rules regarding digital assets is gaining momentum in Asia. Currently, Japan stands out, recording a 120% year-on-year growth in on-chain receipts as of June 2025, surpassing South Korea, India, and Vietnam.
It is predicted that there will be 19 million virtual currency holders in Japan by the end of the year.
The spread of virtual currency in Japan is rapidly progressing. As of May 2025, approximately 12.41 million Japanese people own virtual currency. This represents about 15% of adults, an increase from 9.17 million the previous year.
Meanwhile, according to forecasts, the number could reach 19.43 million by the end of the year. Clearer regulations and increasing institutional participation are driving this growth.
As a result, pressure is mounting on governments to act. Policymakers now face the challenge of developing rules that balance innovation with investor protection.
If successful, a transparent and trustworthy regulatory framework could help cryptocurrencies shed their image as a dangerous frontier and evolve into a trusted investment class in Japan.
The article “Japan takes the hammer down on crypto insider trading – huge fines imposed” was first published on Cryptonews.
