Japan is evaluating tighter regulation on cryptocurrency. The Financial Services Agency (FSA) has suggested transitioning crypto oversight to the Financial Instruments and Exchange Act (FIEA) from the current Payment Services Act.
This shift would reclassify cryptocurrencies as securities, resulting in stricter rules for issuers and exchanges. The FSA believes this could reduce misconduct and enhance transparency. A legislative amendment is set to be presented in the ordinary Diet session next year.
Impact on Japanese Crypto Exchanges
The tighter regulation may initially impact Japanese crypto exchanges. However, it may also enhance long-term confidence and legitimacy within the sector.
This proposal to shift crypto oversight is likely to increase volatility in yen-denominated pairs in the coming weeks. We are preparing for more significant price swings, particularly in the BTC/JPY and ETH/JPY markets. Implied volatility on BTC/JPY options expiring in the next 30-60 days has already ticked up to nearly 70%, a level we haven’t seen since the market jitters in early 2025.
The move toward stricter regulation could put pressure on Japanese crypto exchanges in the near term. We’ve seen data from the Japan Virtual and Crypto assets Exchange Association (JVCEA) showing a 5% decrease in BTC/JPY trading volumes for August 2025, suggesting some traders are already pulling back. This may present an opportunity for bearish strategies, such as buying puts or cautiously shorting futures tied to the Japanese crypto market.
Precedents in Other Markets
We can look back at the precedent set in the United States during 2023 and 2024 when the SEC increased its enforcement. Those actions caused initial market downturns and uncertainty for exchanges before institutional confidence eventually grew. Japan’s path may follow a similar pattern of short-term pain for long-term legitimacy.
