Japan to Implement Strict Measures Against Insider Trading in Cryptocurrency — Significant Penalties Ahead

Japan is set to prohibit insider trading in cryptocurrencies by implementing a surcharge system, where offenders would incur penalties linked to their illicit profits.

Nikkei reported on Wednesday that the Securities and Exchange Surveillance Commission (SESC) will acquire the authority to investigate questionable crypto transactions.

According to the proposal, it will be able to recommend surcharge orders and refer serious breaches for criminal prosecution. This represents a significant change, as the current insider trading regulations under the Financial Instruments and Exchange Act do not extend to cryptocurrencies.

The Financial Services Agency, which supervises the SESC, intends to finalize the regulations through a working group by the year’s end. Subsequently, it plans to present amendments to the Financial Instruments and Exchange Act during the next regular parliamentary session.

Japan Moves Toward Stricter Crypto Oversight Beyond Industry Self-Regulation

At present, exchanges and the Japan Virtual and Crypto Assets Exchange Association (JVCEA) are expected to engage in self-regulation. However, critics argue that the transaction monitoring system is insufficient, allowing for unfair practices.

BREAKING: Japan’s leading financial regulator will implement regulations to prohibit insider trading of cryptocurrencies, according to Nikkei.

— unusual_whales (@unusual_whales) October 15, 2025

Under the suggested framework, the FIEA will explicitly prohibit trading cryptocurrencies based on nonpublic or undisclosed information.

Following this, the FSA will provide comprehensive guidelines to clarify which actions fall under this regulation. For instance, it may include trades executed using private knowledge regarding a token’s forthcoming listing. Likewise, acting on information about a security vulnerability at an exchange before it is made public would likely be considered a violation.

Defining Crypto Insiders Remains Complex As Many Tokens Lack Clear Issuers

Japan encounters a unique challenge as numerous cryptocurrencies do not have a defined issuer, complicating the identification of who qualifies as an insider. This uncertainty has resulted in limited enforcement in the crypto sector compared to traditional securities.

In Asia, the demand for clearer regulations surrounding digital assets has gained traction. Japan now stands out, having recorded a 120% year-on-year growth in on-chain value received as of June 2025, surpassing South Korea, India, and Vietnam.

Forecasts Point To 19M Japanese Crypto Holders By Year-End

Crypto adoption in Japan is accelerating rapidly. As of May 2025, approximately 12.41 million Japanese individuals owned cryptocurrencies. This accounts for about 15% of adults, an increase from 9.17 million the previous year.

Meanwhile, projections indicate that this number could reach 19.43 million by the end of the year. Enhanced regulations and increasing institutional involvement are propelling this growth.

Consequently, there is growing pressure on the government to take action. Policymakers are now tasked with developing regulations that balance innovation with investor protection.

If successful, a transparent and reliable regulatory framework could assist in transforming crypto’s reputation from a risky frontier to a legitimate investment class in Japan.

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