Japan is considering implementing stricter regulations on cryptocurrencies in an effort to combat insider trading, according to a report by Nikkei. The country’s financial regulator, the Financial Services Agency (FSA), is reportedly planning to redefine cryptocurrencies under financial law, potentially classifying them as financial products.

Currently, cryptocurrencies like Bitcoin are treated as a means of settlement under the Payment Services Act. However, if the FSA’s proposed bill to revise the Financial Instruments and Exchange Act is passed, cryptocurrencies could be placed in a different category from traditional securities like stocks.

The move comes as Japan has seen a significant increase in crypto trading activity, with the number of active cryptocurrency accounts reaching about 7.1 million in 2024, more than three times the number from five years ago. With this surge in interest, authorities have reportedly received more complaints from investors who feel they were misled into buying crypto.

If cryptocurrencies are classified as financial products, companies pitching investments in them may have to register with regulators, not just exchanges. This could lead to stricter rules being enforced by the FSA, regardless of a company’s location. However, it remains unclear how exactly the agency plans to enforce these new regulations.

Earlier in March, Japan’s Cabinet approved a proposal to amend the Payment Services Act, aiming to relax regulations for stablecoins and crypto brokerages. This move is intended to make it easier for crypto firms to establish a presence in Japan.

Overall, Japan’s potential reclassification of cryptocurrencies as financial products reflects a growing trend of regulatory scrutiny in the crypto industry. As the market continues to evolve, it is likely that more countries will follow suit in implementing stricter rules to protect investors and prevent fraudulent activities in the crypto space.