Japan’s Financial Services Agency (FSA) has created an independent regulatory division focused on digital currencies and stablecoins. The change takes effect on August 7 and elevates cryptocurrency supervision to full departmental status within the agency.

The new structure is intended to give Japan a stronger framework for overseeing exchange operations, digital payment innovation, and broader financial technology development, as the country continues to tighten rules for a market that has expanded beyond simple exchange oversight into payments, disclosures, and product design.

Independent Department Consolidates Digital Asset Oversight

On August 5, the FSA announced the creation of the Cryptocurrency and Stablecoin Division after approval of a broader organizational reform. The division will operate under the Asset Utilization and Insurance Supervision Bureau starting August 7. The new arrangement brings together several office-level groups that had previously handled cryptocurrency regulation, supervision, and technology-related policy across the agency.

Before the restructuring, cryptocurrency-related responsibilities were mainly managed within the Comprehensive Policy Bureau’s Risk Analysis Division. That setup included both the Cryptocurrency and Blockchain Innovation Office and the Cryptocurrency Monitoring Office. The revised framework creates a single department with consolidated authority over Japan’s digital asset regulatory landscape.

The division will include three offices, each with a defined role. The Cryptocurrency Monitoring Office will oversee licensed exchanges and registered service providers. The other two offices will focus on innovation policy development and strategic planning for digital payment systems.

Legislative Reforms Expand Regulatory Scope

The organizational change comes alongside major revisions to the Financial Instruments and Exchange Act. Under the updated framework, lawmakers have reclassified digital currencies as financial instruments. That move places Japan’s cryptocurrency sector under regulatory standards closer to those applied to conventional securities markets.

The revised law also introduces insider trading restrictions for cryptocurrency markets. In addition, certain issuers will now be required to file annual disclosure reports to improve market transparency. Together, these measures expand oversight and tighten conduct requirements across the digital asset industry.

The legislation also sharply increases penalties for unregistered activity. Maximum prison terms will rise from three years to ten years once the changes take effect. Financial penalties will also increase, with fines moving from three million yen to ten million yen.

Tax Reform, Bitcoin ETF Plans and Compliance Priorities

Japan is also developing a separate tax framework for cryptocurrency profits. The proposed system would apply an effective tax rate of 20% and allow a three-year loss carryforward deduction. Current expectations suggest the tax changes may take effect by 2028.

At the same time, authorities are considering regulatory adjustments that could allow domestic Bitcoin exchange-traded funds. The FSA is continuing to review investment trust rules as it works on the legal structure needed for approval. These steps would move Japan closer to permitting regulated digital asset investment products, while leaving the agency with the task of aligning new products with the same supervisory framework now being consolidated in the new division.

Regulatory pressure on international platforms has also increased alongside the broader policy shift. Bitget said it will restrict Japanese user accounts from November 1, with full position closures scheduled for December 31. The newly established division is expected to strengthen Japan’s enforcement capacity while supporting regulated innovation within the country’s digital asset sector.