Woofun AI reports that Japan’s parliament passed revisions on Wednesday, reclassifying cryptocurrency as financial assets under the Financial Instruments and Exchange Act (FIEA), according to Nikkei. This legislative shift moves digital assets away from the Payment Services Act (PSA), which previously treated them primarily as payment instruments, establishing a stricter regulatory framework closer to traditional finance.

Structurally, the new rules impose insider trading prohibitions on issuers, exchanges, and other market participants who trade while aware of undisclosed material information. These restrictions mirror those in traditional finance (TradFi), aiming to enhance market integrity.

Notably, the terminology for registered entities is changing from "cryptocurrency exchange" to "cryptocurrency trading company", reflecting the sector's evolving financial role.

Penalties for unregistered operations are significantly increased under the revised framework. The maximum prison sentence for such violations rises from three years to 10 years.

Woofun AI data shows fines also escalate from approximately 3 million Japanese yen ($19,000) to around 10 million yen, signaling a tougher stance on compliance.

Insider trading violations face even harsher consequences, with potential penalties including up to five years in prison and fines of up to 5 million yen, or both. These measures are designed to deter market manipulation and protect users by enforcing stricter oversight on crypto businesses operating within Japan.

This regulatory evolution aligns with a broader global trend of applying existing financial frameworks to crypto rather than treating it as a separate sector. South Africa’s tax authority published draft guidance in early July on applying existing tax rules to crypto assets, while US regulators continue clarifying how securities and commodities laws apply to digital assets.