Japan Set to Crack Down on Crypto Insider Trading with Significant Penalties

Japan

Japan is planning to outlaw insider trading in cryptocurrencies by implementing a surcharge regime, which means offenders will face penalties based on their illicit profits. According to a report by Nikkei, the Securities and Exchange Surveillance Commission (SESC) will gain the authority to investigate questionable crypto transactions.

As part of this new initiative, the SESC will have the ability to recommend surcharge orders and refer serious breaches for criminal prosecution. This represents a significant shift from the current regulations, as the insider trading rules under the Financial Instruments and Exchange Act do not presently extend to cryptocurrencies. The Financial Services Agency (FSA), which oversees the SESC, aims to finalize these new rules through a working group by year-end. Following that, it intends to propose amendments to the Financial Instruments and Exchange Act in the next parliamentary session.

Japan Moves Towards Stricter Crypto Regulation Beyond Self-Regulation

At this time, cryptocurrency exchanges and the Japan Virtual and Crypto Assets Exchange Association (JVCEA) are expected to self-monitor their activities. However, critics point out that the existing transaction monitoring systems are inadequate and leave opportunities for unethical practices.

BREAKING: Japan's top financial regulator will introduce regulations to ban insider trading of cryptocurrencies, per Nikkei. — unusual_whales (@unusual_whales) October 15, 2025

Under the proposed framework, the Financial Instruments and Exchange Act (FIEA) will clearly prohibit trading cryptocurrencies based on confidential or undisclosed information. The FSA plans to provide detailed guidelines that will clarify which actions fall under this new rule. For instance, trades made using private knowledge about a token’s upcoming launching could be deemed violations. Similarly, making trades based on confidential information regarding an exchange's security vulnerability before it is publicly disclosed would also likely breach regulations.

Challenges in Identifying Crypto Insiders

Japan faces a unique challenge because many cryptocurrencies do not have clearly defined issuers, complicating the identification of who qualifies as an insider. This lack of clarity has hindered the enforcement of insider trading rules in the crypto market, which is far less tested than in traditional securities.

Across Asia, the demand for clearer regulations surrounding digital assets is gaining traction. Japan is notable for its impressive growth in on-chain value received, increasing by 120% year-on-year as of June 2025, surpassing countries like South Korea, India, and Vietnam.

Projection: 19 Million Japanese Crypto Holders by Year-End

Cryptocurrency adoption is rapidly increasing in Japan. As of May 2025, around 12.41 million Japanese individuals owned cryptocurrencies, accounting for roughly 15% of the adult population. This is a notable increase from 9.17 million the previous year.

Forecasts suggest that this figure could reach approximately 19.43 million by the end of the year. The growth in crypto ownership is being propelled by clearer regulations and increased institutional involvement. Consequently, there is escalating pressure on the government to take decisive action. Policymakers must now navigate the challenge of establishing rules that balance the need for innovation with the necessity of protecting investors.

If implemented successfully, a transparent and reliable regulatory framework could help change the perception of cryptocurrencies in Japan, transitioning them from a high-risk venture to a credible investment option.

Key Takeaways

Japan plans to implement penalties for cryptocurrency insider trading.
New powers for the SESC will allow investigation and prosecution of such violations.
Current self-regulation by exchanges is deemed insufficient.
New regulations will clearly define insider trading in cryptocurrency.
Japan’s significant growth in crypto adoption indicates an increasing investor interest.