Japan is moving ahead with a major regulatory reform that would transfer crypto assets from the Payment Services Act to the Financial Instruments and Exchange Act, or FIEA. According to XWIN Research Japan, the shift reflects a broader market reality: cryptocurrencies are increasingly being treated as investment assets rather than payment instruments.
The firm also explained how the proposed changes could affect the DeFi sector.
XWIN Research noted that after the approval of spot Bitcoin ETFs in the United States, institutional ownership expanded rapidly, helping bring Bitcoin into traditional asset management. Under Japan’s proposed framework, crypto assets would be classified as a separate category of financial products.
What The Reform Changes
According to XWIN Research, the new rules would cover information disclosure, market manipulation, insider trading, and stronger oversight of service providers. The firm said these measures are designed to improve transparency and investor protection.
The decentralized finance market remains more difficult to regulate. Rather than applying the same rules to all DeFi activity, lawmakers are expected to focus on who actually controls or influences users. Protocol developers, interface operators, wallet providers, decentralized autonomous organizations, and token issuers could each face different responsibilities.
XWIN Research said future regulation should be based on actual functions and control rather than formal labels. At the same time, the firm argued that stricter disclosure standards, KYC-based controls, and identity-verified DeFi models could help balance innovation with investor protection.
A New Era For Digital Assets In Japan
XWIN Research emphasized that the transition to the FIEA is more than a technical regulatory change. According to the firm, the reform marks the beginning of a new phase in which digital assets become part of Japan’s broader financial system.
The company believes this could create new opportunities for institutional investors and the DeFi ecosystem. The reform would place crypto assets under requirements closer to those applied to traditional securities.
The Cabinet approved the bill on April 10, and the House of Representatives passed it on June 11. The bill is now being reviewed by the House of Councillors and is expected to come into force in 2027.
However, self-custody and many aspects of DeFi are not directly regulated in the current text. Those areas are expected to be addressed through later rules and guidance.
