Japan proposes new crypto rules, classifies Bitcoin and Ethereum separately
Digital assets will be divided based on how they distribute funds
Japan’s Financial Services Agency (FSA) is advancing plans to implement a structured regulatory framework for digital assets, aiming to balance investor protection with the promotion of blockchain innovation.
In its latest discussion paper titled “Verification of the State of the System Related to Crypto Assets,” the agency outlines a new classification system that separates crypto assets into two distinct categories.
A clearer framework for digital assets
According to the FSA, digital assets will be divided based on how they distribute funds. The initiative is intended to tailor regulatory oversight to the distinct characteristics of cryptocurrencies, particularly with regard to how and whether they are used to fund projects or businesses.
Type 1 Assets will include utility tokens and other digital assets used for business funding or issued to support ecosystem development. These assets typically originate from early-stage projects and require strong disclosure obligations to mitigate risks of information asymmetry between issuers and users.
Type 2 Assets, by contrast, encompass decentralized cryptocurrencies such as Bitcoin and Ethereum, which are not tied to specific issuing entities or used to fundraise for business initiatives. The FSA acknowledges that regulating such assets is inherently more complex, given the lack of a centralized issuer and the decentralized nature of their operations.
Aligning with broader crypto strategy
This classification proposal comes at a time when Japan is reconsidering its traditionally cautious stance on digital assets. Earlier signals from the FSA suggested the potential lifting of bans on crypto-based exchange-traded funds (ETFs), demonstrating a growing interest in treating cryptocurrencies as regulated financial instruments.
The FSA is currently seeking public input on the new classification before finalizing any legislative changes. If adopted, this approach could serve as a model for other jurisdictions seeking to bring greater clarity and legitimacy to the treatment of digital assets.
We also reported earlier that Swedish MP proposes adding Bitcoin to currency reserves.
