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The Second Meeting of the Financial System Council's Working Group on Crypto Assets

Norbert Gehrke

Norbert Gehrke

— 8 min read
The Second Meeting of the Financial System Council's Working Group on Crypto Assets

The second meeting of the Financial System Council's Working Group on Crypto Assets, held on September 2, 2025, highlights a significant push in Japan towards strengthening crypto asset regulation, primarily by considering a shift from the Payment Services Act (PSA) to the Financial Instruments and Exchange Act (FIEA).

This move is driven by the increasing investment-oriented nature of crypto assets, the need for enhanced investor protection, and a desire to foster market reliability and innovation.

Concurrently, the US is also advancing its regulatory framework, with key legislation like the "Digital Asset Market Structure Bill (CLARITY Bill)" aimed at clarifying supervisory authorities (SEC vs. CFTC) and establishing comprehensive regulatory frameworks for digital commodities and stablecoins.

Challenges remain in effectively classifying crypto assets (especially distinguishing between "funding/business activity type" and "non-funding/non-business activity type"), implementing robust information disclosure, and managing the unique risks associated with the asset class, such as price volatility and cyber-attacks.

1. Japan's Regulatory Shift: From Payment Services Act to Financial Instruments and Exchange Act (FIEA)

Japan is actively discussing moving the primary legal framework for crypto assets from the Payment Services Act to the Financial Instruments and Exchange Act (FIEA) to enhance investor protection and market integrity, aligning with the investment-focused evolution of crypto assets.

Rationale for Shifting to FIEA

  • Investment-Oriented Nature: Crypto assets are increasingly viewed as investment products, with over 12 million accounts in Japan and over 5 trillion JPY in user deposits. Surveys show over 70% of holders are middle-income, and 86% expect long-term gains. The Financial Services Agency (FSA) states, "The investment-oriented nature of crypto assets is progressing, and the pressing issues surrounding crypto asset investment are highly compatible with problems traditionally addressed by the FIEA."
  • Enhanced Investor Protection: The FIEA offers a more robust framework for investor protection, covering issues like information asymmetry, unregistered operators, insider trading, and market manipulation.
  • Addressing Current Issues: Current problems include unclear whitepapers, discrepancies between descriptions and actual code, lack of issuer disclosure obligations under current self-regulation, and prevalent fraudulent solicitations. The FSA notes, "The majority [of consultations] concern fraudulent solicitations for crypto asset investments or transactions."
  • Global Alignment: International bodies like IOSCO are recommending stronger measures against fraud and market abuse, including insider trading, and some European countries have already enacted relevant legislation.
  • Preventing Fraud and Exploitation: The Japan Blockchain Association (JBA) emphasizes the importance of "preventing fraudulent and evasive acts by issuers and exchange operators for investor protection."

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