Japan’s new rules target crypto insider trading

Japan’s financial regulators are reportedly preparing to outlaw or restrict insider trading in cryptocurrencies. According to Nikkei Asia, once the new measures take effect, the nation’s watchdog, the Securities and Exchange Surveillance Commission (SESC), will be able to launch investigations into suspected insider trading and recommend penalties or criminal action.

Since crypto assets aren’t covered by insider trading rules under the Financial Instruments and Exchange Act (FIEA), and the Japan Virtual and Crypto Assets Exchange Association (JVCEA) has limited surveillance on the sector, regulators are calling for tighter control over the market.

This comes as an exploit bearing similarities to other North Korean hacks, which resulted in approximately $21 million being stolen from a major Japanese financial firm, according to online sleuth ZachXBT.

Regulators will detail which conduct is covered by the new rules on insider trading

The Financial Services Agency, which oversees the SESC, is set to begin consultations on the new regulatory measures, aiming for enactment in 2026.   Nikkei reported that the SESC’s involvement could help create fairer trading conditions and boost confidence in cryptocurrencies as legitimate investment assets, given growing concerns about the current level of oversight.

The report stated that authorities plan to start by amending the Financial Instruments and Exchange Act to explicitly ban the use of insider information in crypto trading. After this step, the Financial Services Agency (FSA) will provide detailed guidelines that clarify which actions fall under this rule. These actions include trading based on knowledge of future exchange listings or undisclosed security weaknesses.

For traditional securities, such as stocks and bonds, insider trading laws clearly define the types of events they cover, including mergers, corporate restructurings, and the financial impacts of natural disasters. But applying similar rules to cryptocurrencies is far more complicated. Some tokens have no identifiable issuer, making it difficult to determine who counts as an “insider.”

Japan also has relatively limited experience in handling insider trading cases involving digital assets compared with traditional markets. When the European Union introduced its crypto asset regulations in 2024, it too avoided specifying exactly which information or actions would be covered—highlighting the complexity of applying conventional financial rules to this fast-evolving sector.

Cryptocurrency trading continues to rise, with Japan reporting 7.88 million active accounts as of August, a fourfold increase over the past five years. Around the world, insider trading and fraud cases have become more visible as the crypto market expands. In 2022, former Coinbase employees were arrested for sharing confidential information with relatives and friends who allegedly profited from it.

In 2023, the International Organization of Securities Commissions urged global regulators to strengthen controls on crypto-related insider trading and market manipulation. The EU and South Korea have since led the way in establishing such rules. Japan’s FSA and SESC plan to use both global models and local experiences to create their own framework.

Takaichi is anticipated to support the digital economy in the country

Many analysts expect Sanae Takaichi, who is viewed as the leading candidate to become Japan’s next prime minister, to bring new energy to markets for riskier assets, such as cryptocurrencies, while maintaining the country’s strong regulatory reputation. Her leadership is also seen as a potential driver for a more progressive technology agenda, which aligns with her calls for “technological sovereignty” and increased investment in blockchain and other types of digital infrastructure.

Elisenda Fabrega, General Counsel at the tokenization firm Brickken, also stated that Takaichi’s rise could alter Japan’s approach to crypto regulation and significantly impact investor confidence in the digital asset market.

Other analysts believe that with Takaichi’s administration, Japan could see improved regulatory clarity around token types. Currently, the FSA classifies tokens—currently divided into payment, securities, and utility categories, each subject to its own oversight.