Japan Bans Crypto Insider Trading, Sets Global Standard

Japan’s Financial Services Agency is undertaking a fundamental restructuring of cryptocurrency oversight by moving to explicitly ban insider trading in digital assets. The forthcoming amendments to the Financial Instruments and Exchange Act will empower the Securities and Exchange Surveillance Commission with securities-style investigative authority over crypto markets. This represents a significant departure from the current approach in jurisdictions like the United States, which handles crypto insider trading on a case-by-case basis using existing security laws.

John Park, head of Korea at Arbitrum Foundation, told Decrypt that Japan is ‘choosing legislative clarity over case-by-case improvisation’ by situating ‘crypto insider-trading prohibitions inside the FIEA and empowering the SESC with securities-style tools.’ This legislative-first model aligns with the European Union’s philosophy under MiCA and establishes a high bar for market integrity that could reshape global standards. Once formalized, the SESC will have authority to probe suspicious crypto trades and recommend surcharges or criminal referrals for transactions based on undisclosed information.

Policy observers predict Japan’s move will create what they term ‘competitive convergence,’ pushing other major markets to align on crypto regulation standards. Cessiah Lopez, head of policy and research at Superteam UK, a talent layer for Solana, said Japan’s regulatory clarity could ‘add pressure for a clearer federal framework’ in the U.S., which currently approaches insider trading in crypto through enforcement actions rather than comprehensive legislation.

Park sees ‘operational norms for market integrity’ hardening ‘in Brussels and Tokyo first,’ while U.S. market participants may soon ‘adapt to those norms out of competitive necessity.’ The effect, according to Park, is a ‘de facto clarity bloc that institutions find legible, even if the local rulebooks are not identical.’ This convergence addresses what Lopez identified as the ‘fairly inconsistent’ treatment of decentralized finance actors in the U.S., where ‘different enforcement scopes, and policy-effecting timelines’ have led to regulatory fragmentation.

Sam Seo, chairman at the Kaia DLT Foundation, emphasized that codifying insider trading prohibitions depends on ‘how quickly major markets can align on outcomes.’ While the U.S. will ‘build its approach through enforcement and case law’ and the EU would likely ‘integrate this into its MiCA framework,’ Japan’s move ‘makes it politically straightforward’ for other jurisdictions ‘to treat insider trading in tokens as a crime, not a grey area.’

The extension of securities-style oversight to digital assets represents a maturation of cryptocurrency markets toward traditional financial standards. As Lopez told Decrypt, ‘Insider trading erodes the integrity of our international financial systems and contributes to the subversion of the crypto community’s belief in democratizing access to wealth.’ She welcomed ‘any move that helps harmonize the protection against it on a global scale.’

Seo noted that such regulatory clarity benefits those who ‘focus on utility’ while creating ‘liability for those who trade on confidential information.’ He emphasized that ‘integrity is now a baseline requirement’ for cryptocurrency markets seeking mainstream adoption and institutional participation. This shift from regulatory ambiguity to explicit prohibition signals that Japan views market integrity as fundamental to the healthy development of digital asset markets.

The gravitational pull of Japan’s regulatory framework, combined with Europe’s MiCA implementation, creates a compelling standard that global institutions can navigate despite regional differences. As compliance teams standardize around these frameworks, market participants operating across jurisdictions will find consistent rules for insider trading prohibitions, reducing regulatory arbitrage and strengthening global market integrity.