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Japan reclassifies cryptocurrency as financial instrument in major legislative change

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Japan reclassifies cryptocurrency as financial instrument in major legislative change

The Japanese government passed an amendment to the Financial Instruments and Exchange Act on Friday, officially reclassifying crypto assets as financial instruments.

Summary

  • The Japanese government officially reclassified cryptocurrency as a financial instrument on Friday through an amendment to the Financial Instruments and Exchange Act.
  • New regulations reported by Nikkei now prohibit insider trading and require asset issuers to provide transparent financial disclosures once a year.

According to a report by Nikkei, the new legislation introduces a ban on insider trading and prohibits any buying or selling of digital assets based on non-public information.

Previously, the Financial Services Agency handled crypto under the Payment and Settlement Act, viewing it primarily as a tool for transactions. The pivot to the new legal framework comes as a direct response to a surge in institutional interest. 

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Under these updated rules, crypto “issuers” must adhere to higher transparency standards, including mandatory annual disclosures.

To support this transition, the Financial Services Agency has updated its oversight from the previous Payment and Settlement Act. 

Cryptocurrency “issuers” are now required to maintain higher levels of transparency, including the mandate to disclose financial information at least once a year. The amendment also stiffens penalties, increasing both fines and potential prison sentences for exchanges that operate without a license.

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“We will expand the supply of growth capital in response to changes in financial and capital markets, and ensure market fairness, transparency, and investor protection,” Finance Minister Satsuki Katayama said in an accompanying statement.

Beyond immediate regulations, the government is also overhauling the tax structure to encourage market participation. In December, officials backed a plan to drop the maximum tax rate on crypto profits in favor of a 20% flat rate. 

This follows comments from Katayama earlier this year, suggesting that robust exchange infrastructure is essential for citizens to benefit from blockchain technology.

The long-term roadmap includes the legalization of crypto exchange-traded funds (ETFs) by 2028, as noted in a January report. Major financial players, such as Nomura Holdings and SBI Holdings, are already expected to lead the development of these crypto-linked products as the country prepares for broader mainstream adoption.

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Crypto World

Iran Bitcoin toll report raises questions over oil ship payments

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UK shuts down crypto exchange Zedxion after sanctions probe ties platform to Iranian networks

Reports that Iran may accept crypto for oil tanker tolls in the Strait of Hormuz have sparked debate across the digital asset market. 

Summary

  • Reports on Iran’s possible crypto tolls for oil tankers have split opinion across Bitcoin and stablecoin circles.
  • Analysts said stablecoins face freeze risks, while Bitcoin supporters called BTC harder to block or control.
  • Galaxy’s Alex Thorn said tanker payments may use Bitcoin addresses, not Lightning, due to size limits.

The discussion followed a Financial Times report that linked the proposal to Iran’s efforts to reduce exposure to US sanctions.

Market participants have focused on one question: whether Bitcoin would play a real role in such payments. Conflicting claims have since pointed to stablecoins or Chinese yuan as other possible options.

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The latest debate started after reports said Iran was considering Bitcoin payments for ships crossing the Strait of Hormuz. The waterway remains one of the world’s busiest energy routes, which has pushed the topic beyond crypto circles and into wider market discussions.

Alex Thorn, head of firmwide research at Galaxy, said later reports did not fully support the original Bitcoin claim. He said some accounts suggested the tolls could instead be settled in stablecoins or Chinese yuan, which left the payment method unclear.

That uncertainty has driven much of the reaction from Bitcoin supporters and market analysts. With no confirmed payment framework in place, traders and industry figures have treated the story as a developing issue rather than a settled policy.

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The lack of an official and detailed public plan from Iranian authorities has also kept room for doubt. For now, the crypto market is responding more to reports and commentary than to a final rule.

Bitcoin and stablecoins draw different arguments

Bitcoin supporters argued that BTC would be harder for outside parties to freeze or block. Justin Bechler said, “USDT and USDC include built-in blacklist functions at the smart contract level,” adding that issuers can freeze funds when addresses are flagged.

He also said, “Bitcoin has no issuer, no compliance officer to pressure, and no freeze function.” That argument has pushed some market participants to present Bitcoin as a more resilient option for cross-border settlement under sanctions pressure.

Still, that view has not settled the debate. Stablecoins remain widely used in global crypto payments because they reduce price swings, and that may still matter for any large commercial transaction tied to oil shipping.

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The discussion also reflects the difference between theory and practice. A payment method may look strong on paper, but large state-linked payments depend on speed, scale, compliance risk, and operational ease.

Payment size and logistics remain key issues

Thorn estimated that tanker tolls could range from $200,000 to $2 million per ship. That size has raised doubts about whether the Lightning Network would be the main rail, even though some early reporting suggested a payment could be completed within seconds.

He said the more likely setup would involve Iran providing a QR code or a Bitcoin address after approving a ship’s passage. That method would avoid the limits that can affect very large Lightning payments.

Thorn also noted that the largest known Lightning transaction to date was about $1 million. That figure matters because some tanker tolls may sit above that level, which could make direct onchain settlement or pre-arranged transfers more practical.

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WLFI Drops to Record Low After Token-Backed Borrowing Raises Risk Concerns

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WLFI Drops to Record Low After Token-Backed Borrowing Raises Risk Concerns

WLFI, the native token of the Donald Trump–backed World Liberty Financial platform, sank to an all-time low on Saturday as crypto users expressed concerns after revelations that the project used a large amount of its own tokens to take out loans.

The token hit a new low of around $0.07714 on Saturday, down 83% from its peak of $0.46 reached last September, according to data from CoinMarketCap. WLFI is currently at $0.07879, down by 4.66% over the past day.

The downturn came after it was revealed that wallets linked to World Liberty Financial deployed substantial WLFI holdings as collateral on Dolomite, a decentralized lending platform co-founded by the project’s chief technology officer, Corey Caplan.

WLFI token down 65% over the past year. Source: CoinMarketCap

Onchain data from Arkham shows that a wallet linked to World Liberty Financial deposited around 5 billion WLFI tokens on Dolomite. The wallet then used the tokens as collateral to borrow $75 million in USD1 and USDC (USDC) stablecoins, later transferring more than $40 million to Coinbase Prime.

Related: CFTC unveils innovation task force members in crypto clarity push

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WLFI-backed loan position sparks concerns

The large collateral position has raised concerns among DeFi analysts, who warn it could create risks for lenders on Dolomite if WLFI’s price falls and approaches liquidation levels.

“WLFI has almost a $10 billion FDV, but it is not an extremely liquid asset,” one user wrote on X. “So imagine what would happen if 5% of WLFI’s total supply would suddenly need to be sold to liquidate the position,” he added.

Another X user argued that the setup resembles creating artificial “chips” and borrowing against them. “It’s the financial equivalent of printing casino chips, borrowing cash against them, and telling everyone else not to panic because the house still believes in the chips,” they claimed.

Source: Ethan DeFi

Dolomite has a relatively small footprint in decentralized finance, ranking 19th among lending platforms by total value locked, according to DefiLlama.

Related: White House warns staff as Iran bets add to growing insider trading concerns

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World Liberty defends WLFI lending

World Liberty Financial acknowledged the lending activity on social media, but sought to calm markets, stating that its positions remain well above liquidation thresholds. The project described itself as an “anchor borrower” for WLFI and argued that the strategy helps generate yield.

“Everyday users are earning outsized stablecoin yields right now — at a time when traditional markets are offering very little. That’s the whole point,” the project wrote on X.

On Friday, World Liberty said it will soon introduce a governance proposal to create a phased unlock schedule for WLFI tokens held by early retail buyers, replacing immediate access with a long-term vesting plan subject to community vote.

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