Japan’s FSA introduces new framework that divides crypto into two categories

According to a recent report by Coinpost, the country’s Financial Services Agency has asked for public feedback regarding a discussion paper titled “Verification of the state of the system related to crypto assets.” The financial watchdog will be collecting opinions on the new cryptocurrency framework introduced through the discussion paper until May 10, 2025.

The paper presents a dual-approach to regulating crypto, by dividing crypto assets into two different categories based on how funds are distributed. The first category is called Type 1, which encompasses crypto assets used for business purposes or to generate funding for the parent project. These include altcoins from emerging projects that still need community funding to keep growing.

While the other category, Type 2, includes crypto assets that are more decentralized or more established by nature. Type 2 cryptocurrencies include Bitcoin btc-0.51%Bitcoin and Ethereum eth-2.96%Ethereum, which do not issue tokens to raise funds for business purposes. These tokens are called “non-fundraising or non-business crypto.”

Depending on which category the virtual assets fall, they are subject to a different set of crypto regulations, adjusted to suit each type’s characteristics.

Japan’s FSA stated that with Type 1 crypto assets, regulators feel a strong need to push for more transparency from projects to disclose information to prospective traders about what the funds would be used for.

Therefore, the Type 1 token issuers would need to disclose detailed information about the purpose of their funding, project details and risks associated to investing in the project among others. They will be expected to comply to regulations from the Japanese FSA, which include occasional disclosure obligations.

The regulations for Type 1 crypto would come into effect once the project has garnered a large number of general investors.

“There is a possibility that correspondence will mainly be done through exchange companies,”