Crypto-Asset Derivatives

Crypto-asset derivatives come up when compliance and regulatory staff sort out how Japanese rules apply, and when risk managers check how leverage and margin work.

What crypto-asset derivatives are based on

Crypto-asset derivatives are derivatives whose underlying asset is a crypto-asset. Japan's Payment Services Act defines crypto-assets. The first kind is proprietary value, recorded electronically, that can be used to pay unspecified persons as consideration, can be bought and sold with unspecified persons, and can be transferred through an electronic data processing system (excluding currency and similar items). The second kind is a value that can be exchanged with the first kind in either direction¹.

The products covered are futures, options, and perpetual swaps. Japanese law regulates derivative transactions on crypto-assets². Futures, options, and perpetual swaps offered by exchanges overseas are also covered.

Futures, options, and perpetual swaps

Besides futures and options, crypto-asset derivatives include perpetual swaps, which have no expiry.

CME stands for Chicago Mercantile Exchange Inc. and CFE for CBOE Futures Exchange. The CFTC is the US Commodity Futures Trading Commission.

The basics of futures are covered in Forwards and Futures.

A perpetual swap is a contract with no expiry that can be closed out at any time⁵. Without an expiry, its price does not converge to the spot price at maturity the way a futures price does. Instead, the long side and the short side periodically exchange an amount called the funding rate. It is proportional to the gap between the perpetual swap price and the spot price. When the perpetual swap price is above spot, the long side pays the short side. When it is below, the short side pays the long side⁶. Payments are typically made every eight hours⁷.

Consider a hypothetical example in which you hold a long position with a transaction amount of 1 million yen, and the funding rate is +0.01% per payment. The long side pays the short side 100 yen (0.01% of 1 million yen). If payments are made every eight hours, that is three payments a day, or 300 yen. When the funding rate is −0.01%, the short side pays the long side the same 100 yen. Depending on the direction of the price gap, either side can be the payer or the receiver.

Exchange trading and over-the-counter trading

The general difference between derivatives traded on an exchange and derivatives agreed directly between the parties is covered in Exchange-Traded vs OTC Derivatives. The distinction is the same for crypto-assets.

Japan's Financial Instruments and Exchange Act divides derivative transactions in two. A transaction on a financial instruments market that follows the standards and methods set by the operator of that market is an exchange-traded derivative transaction. A transaction conducted outside a market is an over-the-counter derivative transaction⁸. Looking at who sets the terms of the transaction, the market operator sets the standards and methods for exchange-traded derivative transactions, and over-the-counter derivative transactions do not follow those standards and methods. Transactions on crypto-assets are regulated in both cases. The Cabinet Office Order on Financial Instruments Business, etc. (the "Cabinet Office Order") regulates transactions on crypto-assets in three groups. They are exchange-traded (market), over-the-counter, and foreign-market transactions⁹.

The Cabinet Office Order lists the kinds of recipient with which an individual customer's margin may be deposited: financial instruments business operators, etc., financial instruments exchanges, and financial instruments clearing organizations (including their foreign counterparts)¹⁰. On a crypto-asset exchange's perpetual swap, both the long side and the short side deposit margin with the exchange, and the margin is adjusted according to gains and losses¹¹.

Where Japanese regulation stands

In Japan, the 2019 amendment brought derivative transactions that use crypto-assets under the Financial Instruments and Exchange Act. The amending act (Act No. 28 of 2019) was promulgated on June 7, 2019, and the amendment of the Financial Instruments and Exchange Act took effect on May 1, 2020. At that point crypto-assets were added to the definition of financial instruments, and the Payment Services Act changed its term from "virtual currency" to "crypto-asset"¹².

Conducting derivative transactions on crypto-assets as a business requires registration as a financial instruments business. Conducting over-the-counter derivative transactions as a business is a Type I financial instruments business. Financial instruments business operators have a duty to explain the nature of crypto-assets. Everyone is prohibited from fraudulent acts, spreading rumors, and market manipulation¹³.

For transactions with individual customers, the Cabinet Office Order sets a minimum margin. When the contract is concluded, and at a set time each business day, the margin the customer has deposited may fall short of the required amount (50% of the transaction amount). It is a prohibited act for a financial instruments business operator, etc. to continue the contract without having the customer deposit the shortfall promptly. The margin amount used for the comparison is adjusted for valuation gains and losses¹⁰. Margin of 50% of the transaction amount means that the position can be at most twice the size of the margin. The Financial Services Agency explains that margin trading with high leverage is problematic for customer protection, for the business operator's risk management, and because of excessive speculation. For this reason, such trading without margin of at least 50% of the transaction amount is prohibited¹⁴.

In 2026, an act was passed that moves the regulation of crypto-assets from the Payment Services Act to the Financial Instruments and Exchange Act. The bill was submitted to the Diet on April 10, 2026, passed on July 15 of that year, and was promulgated on July 23. It takes effect, in principle, on a date set by Cabinet Order within one year of promulgation¹⁶.

Where regulation overseas stands

Regulation overseas differs by jurisdiction. What follows is a summary from a report that the Financial Stability Board (FSB) published on October 16, 2025, with information as of August 2025. The EU requires crypto-asset service providers that offer derivatives services to obtain a license under frameworks such as the Markets in Financial Instruments Directive (MiFID II). Japan, Singapore, and others handle them under existing derivatives regulation. Hong Kong and Türkiye explicitly prohibit leveraged trading and derivatives transactions. Argentina, Indonesia, and Thailand do not address them explicitly¹⁷. The same report also says that many jurisdictions lack comprehensive coverage of higher-risk activities such as borrowing, lending, and margin trading¹⁸.

For the United States, the FSB report summarizes the findings of the President's Working Group on Digital Asset Markets. Under those findings, when a digital asset meets the statutory definition of a commodity, derivatives referencing it fall within the CFTC's licensing regime¹⁹.

Even when a futures contract is listed on an exchange, the underlying spot market is not necessarily under the same regulation. On December 1, 2017, the CFTC issued a statement on the new CME and CFE bitcoin futures contracts. In it, the CFTC said that the spot markets and exchanges for bitcoin were largely unregulated and that the CFTC's authority over them was limited. The same statement says that completing the futures process is not an approval or endorsement by the CFTC²⁰.

Main risks of crypto-asset derivatives

The first risk is large price swings. A study group set up at the Financial Services Agency in March 2018 judged that crypto-assets move in price more than legal tender does, and concluded that it is appropriate to set an upper limit on the margin multiple that reflects actual conditions²¹.

Consider a hypothetical example in which you hold a long position with a transaction amount of 1 million yen, ignoring fees and funding rates. For a short position, the signs of the gains and losses are reversed.

With margin of 50% of the transaction amount, the loss stays within the margin even if the price falls 30%. However, when the price falls, the deposited amount adjusted for valuation gains and losses can drop below the amount required for maintenance, and you then need to deposit the shortfall promptly. With margin of, hypothetically, 5%, a price fall of only 10% makes the loss twice the 50,000 yen of margin. Gains are enlarged by the same multiple. The Financial Services Agency explains that when the market moves suddenly, loss-cuts may not work properly, and customers may suffer unexpected losses exceeding their margin²².

Custody of deposited assets is another risk. In crypto-asset custody, mismanagement, fraud, or inadequate security can cause customers' assets to be lost or services to be interrupted²³. The margin for derivative transactions on crypto-assets can be provided in crypto-assets as well as securities²⁴. In that case, the value of the margin also changes with the price of the crypto-asset.

Japan's 2019 amendment introduced a provision that requires crypto-asset exchange service providers (those registered under the Payment Services Act) to keep users' crypto-assets segregated. Segregation means, in principle, managing them separately from the provider's own crypto-assets, by a method that carries little risk of undermining user protection²⁵.

The failure of an exchange also affects trading. When the crypto-asset exchange FTX failed in November 2022, the price of bitcoin futures on FTX became much higher than spot, while the opposite happened on other exchanges. The paper on perpetual swaps (He et al.) analyzes this movement as consistent with two kinds of action. One is FTX investors hurrying to close their short positions. The other is exchanges forcibly closing open positions that lacked margin²⁶.

Timeline

Scope and date of this page

Market prices and trading volumes, what the amended provisions of 2026 say, and how margin deposited with an exchange is treated when the exchange fails (including whether the segregation provision extends to margin for derivative transactions) are not covered on this page. The content is based on sources as of October 2026.

Notes

1. "資金決済に関する法律" (Payment Services Act, in Japanese), Article 2, paragraph 14 (the version in force on August 12, 2026, on e-Gov Law Search). The proviso to the paragraph excludes anything that represents a right under Article 29-2, paragraph 1, item 8 of the Financial Instruments and Exchange Act. An English translation exists in the Japanese Law Translation database, but its last version is Act No. 50 of 2020 and it numbers the paragraphs differently, so it is not used for this citation. ↩

2. The Financial Instruments and Exchange Act does not use the term "crypto-asset derivative transaction". It refers to derivative transactions on "crypto-assets and certain electronic payment instruments" (暗号等資産: crypto-assets, plus those items in Article 2, paragraph 5, item 4 of the Payment Services Act that a Cabinet Office Order designates). The definition of 暗号等資産 is in Article 2, paragraph 24, item 3-2 of the Financial Instruments and Exchange Act. The Cabinet Office Order uses the term 暗号資産等関連デリバティブ取引 (derivative transactions related to crypto-assets, etc.). ↩

3. U.S. Commodity Futures Trading Commission, "CFTC Statement on Self-Certification of Bitcoin Products by CME, CFE and Cantor Exchange" (Release Number 7654-17, December 1, 2017). It states that CME and CFE self-certified futures and that Cantor Exchange self-certified binary options. ↩ ↩² ↩³

4. Songrun He et al., "Fundamentals of Perpetual Futures" (arXiv:2212.06888v5, June 2024), page 8. It says "Crypto perpetual futures were first introduced by BitMEX in 2016". ↩ ↩²

5. He et al., "Fundamentals of Perpetual Futures", abstract and page 1. The abstract describes perpetual futures as "swap contracts that never expire". Page 1 says that both parties can open and close positions at any time, that gains and losses are calculated continuously, and that they are allocated to each party's margin account. ↩

6. He et al., "Fundamentals of Perpetual Futures", pages 1 and 10. When the funding rate is positive, the long side pays the short side, and when it is negative, the reverse. In the formula on page 10, the funding rate is proportional to the gap between the perpetual swap price and the spot price. ↩

7. He et al., "Fundamentals of Perpetual Futures", page 2. It says "Typically, the funding rate is paid every eight hours". ↩

8. "金融商品取引法" (Financial Instruments and Exchange Act, in Japanese; English translation: Japanese Law Translation, last version Act No. 68 of 2022), Article 2, paragraph 21 (market derivative transactions, 市場デリバティブ取引) and paragraph 22 (over-the-counter derivative transactions, 店頭デリバティブ取引). Crypto-assets and certain electronic payment instruments (暗号等資産) are included in financial instruments by Article 2, paragraph 24, item 3-2. Article and paragraph numbers follow the Japanese text in force in August 2026, which may differ from the translation. ↩

9. "金融商品取引業等に関する内閣府令" (Cabinet Office Order on Financial Instruments Business, etc., in Japanese; the English translation in the Japanese Law Translation database is not used because it reflects amendments only through Cabinet Office Order No. 7 of 2014), Article 123, paragraph 14 (exchange-traded (market) derivative transactions related to crypto-assets, etc.), paragraph 15 (over-the-counter derivative transactions related to crypto-assets, etc.), and paragraph 16 (foreign-market derivative transactions related to crypto-assets, etc.). The version in force on August 3, 2026, on e-Gov Law Search. ↩

10. "金融商品取引業等に関する内閣府令" (Cabinet Office Order on Financial Instruments Business, etc., in Japanese), Article 117, paragraph 1, item 47 (margin shortfall at the time of contract), item 48 (shortfall below the amount required for maintenance on each business day), paragraph 41 (the required margin at the time of contract is the transaction amount multiplied by 50/100), and paragraph 42 (the same for the margin required for maintenance). The customer must be an individual. The definition of the recipient of margin, etc. is in paragraph 1, item 47. ↩ ↩²

11. He et al., "Fundamentals of Perpetual Futures", page 1 ("other than posting margin with the exchange") and page 10 (both the long and the short side post margin that is marked to market). ↩

12. Financial Services Agency, "情報通信技術の進展に伴う金融取引の多様化に対応するための資金決済に関する法律等の一部を改正する法律案要綱" (Outline of the bill to amend the Payment Services Act and related laws in response to the diversification of financial transactions accompanying advances in information and communications technology, in Japanese; 198th Diet session; the "2019 outline" below), Part 1, item 1 (1) and Part 2, item 1 (1) and (2). The promulgation and effective dates are from the amendment history of the Financial Instruments and Exchange Act on e-Gov Law Search (Act No. 28 of 2019). ↩ ↩² ↩³

13. "金融商品取引法" (Financial Instruments and Exchange Act, in Japanese; English translation: Japanese Law Translation, last version Act No. 68 of 2022), Article 28, paragraph 1, item 2 (over-the-counter derivative transactions are a Type I financial instruments business), Article 29 (registration), Article 43-6 (explanation of the nature of crypto-assets and certain electronic payment instruments), and Articles 185-22 to 185-24 (prohibition of fraudulent acts, spreading rumors, and market manipulation). Article and paragraph numbers follow the Japanese text in force in August 2026, which may differ from the translation. ↩

14. Financial Services Agency, "コメントの概要及びコメントに対する金融庁の考え方" (Summary of comments and the Financial Services Agency's views on them, in Japanese; April 2020), the response to Nos. 92 to 94 (page 29). It says that margin trading using crypto-assets without receiving margin of at least 50% of the notional amount was prohibited. ↩

15. "金融商品取引業等に関する内閣府令" (Cabinet Office Order on Financial Instruments Business, etc., in Japanese), Article 117, paragraph 1, item 48 and paragraph 40 (calculation on an aggregate basis for several transactions), and Article 123, paragraph 1, items 35 and 36 (loss-cut transactions and the control framework). ↩

16. Financial Services Agency, "国会提出法案等（第221回国会）" (Bills submitted to the Diet, 221st session, in Japanese; submitted April 10, 2026, passed July 15, 2026), and "金融商品取引法及び資金決済に関する法律の一部を改正する法律案要綱" (Outline of the bill to amend the Financial Instruments and Exchange Act and the Payment Services Act, in Japanese), Part 1, item 1 and Part 3, item 1. The promulgation date is from the amendment history on e-Gov Law Search (Act No. 64 of 2026). ↩ ↩²

17. Financial Stability Board, "Thematic Review on FSB Global Regulatory Framework for Crypto-asset Activities" (October 16, 2025), pages 18 to 19 and footnotes 33 and 34 (the report's information is as of August 2025). ↩ ↩²

18. The same Financial Stability Board report, page 2 (Executive summary). It says "Comprehensive coverage of potentially higher risk activities, such as borrowing, lending, and margin trading, is often lacking". ↩

19. The same Financial Stability Board report, page 14. In the passage on the report of the US President's Working Group on Digital Asset Markets, it says that when an asset meets the statutory definition of a commodity, derivatives referencing it fall within the CFTC's "regulatory licensing regime". ↩

20. The CFTC document cited above (December 1, 2017). It says that the spot markets and exchanges for bitcoin are subject to little regulation and that the CFTC's legal authority over them is limited. It also says that completing the processes is not an approval by the Commission, and not a Commission recommendation of the use or value of virtual currency products or derivatives. ↩

21. Financial Services Agency, "コメントの概要及びコメントに対する金融庁の考え方" (in Japanese; April 2020), the response to No. 91 (page 28). It quotes the conclusions of the study group on virtual currency exchange services and related matters (仮想通貨交換業等に関する研究会), set up in March 2018. ↩

22. The same document, the response to No. 89 (page 28). It says that when the market moves suddenly, loss-cuts do not always work properly, and unexpected losses exceeding the margin may arise. ↩

23. The same Financial Stability Board report, page 20. The passage refers to the loss of customers' assets or interruption of services through "mismanagement, fraud, or inadequate security protocols". ↩

24. "金融商品取引業等に関する内閣府令" (Cabinet Office Order on Financial Instruments Business, etc., in Japanese), Article 117, paragraph 37 (margin may be provided in securities or crypto-assets and certain electronic payment instruments). ↩

25. The 2019 outline, Part 1, item 1 (6) and (7) (relating to Articles 63-11, 63-11-2, 63-19-2, and 63-19-3 of the Payment Services Act). Item 1 (7) also gives users the right to be paid ahead of other creditors from the crypto-assets managed by an exchange service provider. The definition of a crypto-asset exchange service provider is in Article 2, paragraphs 15 and 16 of the Payment Services Act, and the segregation duty is in Article 63-11, paragraph 2. ↩

26. He et al., "Fundamentals of Perpetual Futures", pages 9 and 10. The figure note on page 9 gives the FTX failure as November 2022. Page 10 says that the futures price was much higher than spot on FTX and the reverse on other exchanges, and that this is "consistent with" investors closing short positions or exchanges forcibly closing positions. ↩ ↩²