Japan's Financial Services Agency (FSA) has proposed shifting the regulation of crypto assets from the Payment Services Act to the more stringent Financial Instruments and Exchange Act. This move aims to enhance investor protection and align crypto regulations with the securities framework. The FSA's internal report highlights issues such as inadequate information disclosure, unregistered operations, and investment fraud in the crypto sector, suggesting that the mechanisms of the Financial Instruments and Exchange Act are more suitable. The Japanese government will decide on adopting this recommendation after the FSA submits its opinion to the Financial System Council.