Japan Classifies Crypto as Financial Instruments, Bans Insider Trading

This introduces stricter oversight like insider trading bans, annual disclosure requirements for issuers, and tougher penalties for unregistered exchanges. In the US, Scott Bessent urged Congress to pass the Digital Asset Market Clarity Act to establish clear rules for digital assets, though the bill faces delays in the Senate due to disagreements over stablecoin yields. 

Japan Tightens Crypto Rules

Japan took  a major step toward integrating cryptocurrency into its mainstream financial system after amending the Financial Instruments and Exchange Act to officially classify crypto assets as financial instruments. This shift is a big change in how digital assets are treated in the country, moving them beyond their previous designation under the Payment and Settlement Act, where they were primarily considered a means of payment.

The amendment introduces stricter regulatory oversight, including a ban on insider trading and other activities involving the use of undisclosed information in crypto markets. This aligns cryptocurrency trading more closely with traditional financial markets, where such practices are already heavily regulated.

Another key component of the updated legislation is the requirement for cryptocurrency issuers to disclose information annually. This  transparency is expected to provide investors with better insights into projects, which could help reduce risks associated with misinformation and lack of accountability.

Japan’s Finance Minister, Satsuki Katayama, explained that the reforms are designed to expand access to growth capital while also ensuring market integrity and investor safety. The government also strengthened penalties for unregistered cryptocurrency exchanges.

This regulatory shift is part of a strategy to bring cryptocurrency under the same umbrella as traditional finance. By doing so, Japan is positioning itself as a leader in the global digital asset space by encouraging an environment where innovation can coexist with robust oversight. 

In addition to regulatory changes, Japan is also exploring the legalization of crypto exchange-traded funds (ETFs) by 2028, which could accelerate institutional adoption even more. Major financial institutions like Nomura Holdings and SBI Holdings are expected to play a leading role in developing crypto-linked investment products. Combined with plans to reduce crypto tax rates to a flat 20%, these developments indicate that Japan is actively working to create a more attractive and competitive environment for digital asset investment.

CLARITY Act Faces Pressure

The topic of crypto regulation is also turning heads in the US. Treasury Secretary Scott Bessent has urged Congress to move quickly on passing the Digital Asset Market Clarity Act, and warned that limited Senate floor time could delay critical progress on crypto regulation. 

In a recent op-ed that was published by The Wall Street Journal, Bessent explained that the legislation is essential for establishing clear and consistent rules governing digital assets, including cryptocurrencies, tokenized assets, and decentralized exchanges. With the global crypto market now valued at around $3 trillion and adoption growing among Americans, he argued that the United States risks falling behind in financial innovation without decisive action.

The CLARITY Act already passed the House of Representatives in July of 2025, but has faced many delays in the Senate due to disagreements over how stablecoin yields should be regulated. 

House of Representatives voting to pass the CLARITY Act (Source: US House of Representatives)

Traditional financial institutions are concerned that yield-bearing stablecoins could divert deposits away from banks, which could potentially reduce lending capacity. However, crypto industry advocates believe yields are a key driver of innovation and competitiveness, particularly as other jurisdictions continue to advance their digital asset frameworks.

Support for stablecoin yields gained momentum in the White House, where economic advisers challenged claims made by banking groups. According to their analysis, banning stablecoin yields would have only a minimal impact on the broader banking system, increasing total US bank lending by just a fraction of a percent. At the same time, they warned that restricting yields could result in hundreds of millions of dollars in annual welfare losses for users who rely on these returns.

President Donald Trump also weighed in on the debate by criticizing banks for slowing down crypto legislation and accusing them of using the issue of stablecoin yields to stall both the CLARITY Act and the GENIUS Act. 

At the same time, the Treasury is pushing forward with stricter oversight measures for stablecoin issuers under the GENIUS Act. The proposed framework would require issuers to implement robust Anti-Money Laundering and Counter-Terrorism Financing programs.

Industry experts warn that these changes could significantly alter how stablecoins operate, effectively transforming issuers into gatekeepers with increased control over user funds. While these measures were suggested to boost security and regulatory compliance, they also raise concerns about centralization and the potential for widespread transaction monitoring and restrictions.