- The new framework demonstrates a purpose to enhance market transparency while providing stability.
- The public can provide feedback about the proposal between 2025 May.
The Financial Services Agency of Japan established a regulatory system which classifies digital assets between two distinct categories. A new regulatory system under this initiative establishes distinct categories for crypto assets to better match their characteristics so transparency and market protection as well as stability can improve.
The framework system divides crypto assets through fund distribution methods to enable specific regulatory measures. The newly designed strategic classification system aims to tackle the peculiar risks of various digital assets, which will create a safer and more innovative crypto environment in Japan.
Type 1: Business-Purpose Crypto Assets
The category contains crypto assets dedicated to business activities and funding sources for main projects. Altcoins from developing projects obtain their growth through community funding, which makes them part of this category.
The Financial Services Agency plans to boost transparency of Type 1 crypto assets by making project issuers provide detailed information which includes:The funding’s main purpose together with the project description and associated risks for investors.
The regulatory framework offers potential traders essential project details for making well-informed decisions, thus helping reduce fraudulent or mismanaged investment risks. The FSA plans to enforce these regulations after a project obtains general investor support and may classify some Type 1 projects as security tokens to require additional regulatory compliance.
Type 2: Non-Business Crypto Assets
The group of established or decentralized cryptocurrencies consists of Bitcoin (BTC) and Ethereum (ETH) alongside other digital assets that do not issue tokens for business funding. The FSA names these assets “non-fundraising or non-business crypto” assets.
The FSA will not directly regulate issuers of Type 2 crypto projects because identifying one issuer proves challenging, and imposing obligations on them is difficult. The agency will implement regulatory requirements regarding Type 2 cryptocurrencies by focusing on exchange platforms.
The FSA requires crypto exchange firms to deliver information about significant price changes of Type 2 crypto assets when they affect market conditions. The system tracks market movement to identify market manipulation as well as illegal activities.
The FSA treats cryptocurrency as two types based on how digital assets operate and what they are designed for in their regulatory efforts in Japan. This regulatory system targets the achievement of investor protection as well as market stability alongside innovation promotion. Through its specialized regulatory approach for various crypto assets, the FSA creates conditions for Japan to develop a secure, sustainable, transparent crypto ecosystem.
