Japan's Financial Services Agency (FSA) has proposed a legislative shift to regulate cryptocurrencies under the Financial Instruments and Exchange Act, moving away from the current Payment Services Act. This change aims to classify cryptocurrencies as financial products distinct from securities, enhancing requirements for information disclosure, operator supervision, penalties for unlicensed operations, and insider trading regulations. Additionally, the FSA is advancing three payment innovation pilots, including the joint issuance of yen stablecoins, on-chain securities settlement, and interbank tokenized deposit transfers.