Japan's Financial Services Agency (FSA) is set to propose a significant reclassification of cryptocurrency assets by 2026, according to a report by Nikkei.

The move aims to designate cryptocurrencies as financial products under the Financial Instruments and Exchange Act, a shift from their current classification as a means of settlement under the Payment Services Act.

This regulatory change comes amid a rise in reports of cryptocurrency-related scams. The FSA intends to implement stricter regulations on companies involved in crypto investments, which would require exchanges and firms soliciting crypto investments to register with financial authorities. This proposal is part of a broader effort to enhance the oversight of local crypto service providers.

The upcoming amendments are expected to introduce insider trading rules aligned with those governing traditional financial products. However, details regarding these regulations have not yet been disclosed.

It remains unclear how the FSA plans to enforce these rules on foreign entities operating in Japan, particularly as the agency recently requested major platforms like Apple and Google to block five unregistered overseas crypto exchanges from their app stores.

As of January 2025, Japan had approximately 7.34 million active accounts for crypto trading, highlighting the growing interest in digital assets among the Japanese populace. The FSA's proactive approach reflects a response to the increasing complexity of the crypto landscape and the need for a regulatory framework that addresses emerging risks.

The proposed changes come after closed-door discussions among experts analyzing the current legal framework.