Japan’s Financial Services Agency (FSA) has unveiled a new discussion paper proposing a dual regulatory framework for crypto assets, marking a significant step in the country’s evolving digital asset policy. The paper, now open for public comment until 10 May 2025, outlines distinct rules based on how digital assets are used and structured.
Crypto Assets Split Into Two Categories
The FSA’s proposed framework divides cryptocurrencies into Type 1 and Type 2 assets, with each category subjected to different regulatory expectations.
Type 1 assets refer to tokens issued to raise funds or support business operations. These include most altcoins from startups and early-stage projects that rely on community funding.
Type 2 assets cover more decentralised or established tokens like Bitcoin and Ethereum, which aren’t primarily issued for business fundraising purposes.
This categorisation reflects Japan’s attempt to create clearer distinctions between fundraising tokens and decentralised assets, ensuring appropriate oversight without stifling innovation.
Stricter Disclosure for Type 1 Tokens
Type 1 projects, often fundraising ventures, will be required to follow strict disclosure rules. The FSA is calling for enhanced transparency, with issuers expected to provide detailed information on:
How funds will be used
Project details and development roadmaps
Potential risks for investors
These disclosures will become mandatory once the project reaches a significant number of general investors. The FSA is also exploring whether some Type 1 tokens may fall under security token regulations, subjecting them to even stricter financial scrutiny.
Exchange-Focused Oversight for Type 2 Tokens
For Type 2 tokens, the FSA will shift its regulatory focus to crypto exchanges rather than the token issuers. The agency noted that it is often difficult to identify or hold decentralised token issuers accountable.
As part of the policy, exchanges must report major price fluctuations in Type 2 tokens that could impact the broader market. This approach acknowledges the decentralised nature of assets like Bitcoin and aims to monitor market stability through trading platforms instead of targeting unidentifiable issuers.
Toward a New Crypto Legal Category by 2026
The FSA also revealed plans to revise the Financial Instruments and Exchange Act, which could be submitted to parliament as early as 2026. The revision would reclassify cryptocurrencies, moving them away from their current status as payment instruments and instead treating them as a unique financial product category.
This legislative change would further solidify Japan’s commitment to crafting a regulatory regime that reflects the complexity and variety of digital assets.
