Regulators in Japan are planning to classify cryptocurrencies as “financial products” under the Financial Instruments and Exchange Act and introduce a tax overhaul for the sector.
According to local media reports, Japan’s Financial Services Agency (FSA) aims to reclassify 105 cryptocurrencies under the same legal framework as stocks and bonds. This change would bring these digital assets under investor protection rules, paving the way for fairer taxation and stricter market conduct standards.
Under the proposed framework, digital assets like Bitcoin, Ethereum, and others approved for domestic exchange listings would be subject to mandatory disclosures. Exchanges would be required to provide clear information about each token’s issuer, the underlying blockchain infrastructure, and its historical volatility.
Japan is one of the earliest adopters of crypto regulation. However, the country has maintained a stringent framework with high tax burdens and strict oversight measures, which have sometimes hindered both retail and institutional participation.
Currently, cryptocurrencies in Japan are taxed as “miscellaneous income.” High-income traders can face tax rates of up to 55%, making Japan one of the most punitive jurisdictions for crypto investors worldwide.
The FSA is now pushing for a legislative proposal to implement a flat 20% capital gains tax rate on cryptocurrencies. This would align their tax treatment with that of traditional financial instruments, potentially easing the tax burden on investors.
Reports about the FSA’s intention for policy change first emerged in June this year, when the agency published a policy document inviting discussions on moving the sector under the Financial Instruments and Exchange Act.
Oversight remains a key priority for the regulator. Preventing insider trading is another focus area, with the FSA aiming to ban trading based on non-public information and introduce formal penalties for violators under the new bill.
The proposal is expected to be discussed during Japan’s regular parliamentary session in 2026.
### Japan’s Pro-Crypto Approach
Much of the current regulatory effort started under former Prime Minister Shigeru Ishiba, who emphasized cryptocurrencies as crucial in addressing Japan’s long-standing social and economic challenges.
The current Prime Minister, Sanae Takaichi, is also regarded as supportive of emerging technologies. Her government is expected to continue pursuing a pro-technology agenda.
Japanese regulators are also considering whether banks should be allowed to acquire and hold cryptocurrencies. In 2020, the FSA imposed guidelines that effectively barred banks from holding crypto assets due to volatility concerns. However, the agency is now reviewing these restrictions and may allow banks to enter the market under strict risk management conditions.
Another area of focus is stablecoins. Japan is conducting the FSA’s Payment Innovation Project, a trial supporting a joint initiative by major banks to issue yen-based stablecoins and test blockchain-powered settlement systems for institutional payments.
This evolving regulatory landscape highlights Japan’s commitment to balancing innovation with investor protection as it navigates the future of cryptocurrency.
https://bitcoinethereumnews.com/crypto/japan-to-reclassify-crypto-assets-as-financial-products-and-lower-taxes/