Japan’s Financial Services Agency (FSA) released a discussion paper “related to crypto assets,” inviting public comments until May 10, 2025. The paper summarizes the findings of a review conducted by the regulatory body since July last year. A feature of the proposal is the classification of crypto into two types due to changes in the country’s crypto market.
FSA’s Two Classes of Crypto
The first category, known as funding or business activity tokens, includes assets issued to raise funds for projects. This group comprises utility tokens and other crypto assets that channel capital into specific ventures. The FSA noted that it will impose disclosure requirements regarding the use of funds, project details, and associated risks for these assets.
The second category consists of non-funding tokens, of which major crypto assets, including Bitcoin (BTC) and Ether (ETH) belong. Due to the decentralized nature of these assets and the difficulty in identifying a single responsible issuer, the proposed approach would shift responsibility to the crypto exchanges that list and trade them.
Why Categorize Crypto for Regulation?
By comparing different regulatory approaches for the two types of assets, the agency aims to craft a framework tailored to each group’s characteristics. It believes the move will ensure that investor protection and the promotion of innovation are carefully balanced without stifling one another.
It intends to use the feedback from the consultation to regulate crypto assets under the Financial Instruments and Exchange Acts. It asserts that issues such as information disclosure, investment fraud, price formation, and transaction fairness have long been managed under the law.
Nonetheless, the FSA’s discussion paper does not address taxation-related issues. Instead, it focuses exclusively on the regulatory measures that could be applied to crypto assets. The FSA plans to continue analyzing international regulatory trends while considering the diverse opinions submitted during the consultation period.
Crypto Regulation on the Rise
Crypto regulation grows as nations shift from a laissez-faire approach toward more structured frameworks. In the early days, crypto activities were largely unregulated. Today, countries are working to implement policies that provide legal clarity while fostering innovation.
For instance, Pakistan is revamping its regulatory stance to attract foreign investors by creating a legal framework for crypto. In the United States, regulators have recently approved crypto services for banks, paving the way for mainstream financial institutions to integrate digital asset offerings into their portfolios.
Similarly, via a recent move, Nigeria has taken steps to regulate its crypto market, instituting measures to protect consumers and promote market transparency.
