Japan’s Lower House approved legislation that reclassifies cryptocurrencies under the country’s financial instruments framework, aligning digital assets more closely with stocks and bonds. This move signals a major regulatory shift aimed at integrating crypto assets into the mainstream financial system.
The bill proposes to bring cryptocurrencies like Bitcoin and Ether under stricter trading rules found in the Financial Instruments and Exchange Act, which could enable exchange-traded funds (ETFs) tied to cryptocurrencies. This would provide Japanese investors with a regulated, safer way to gain exposure to digital assets outside of direct exchange trading.
One of the most notable aspects of the legislation is its tax reform component. The current capital gains tax on cryptocurrency earnings—set at a maximum of 55%—could drop to a flat rate of 20%, matching the tax rate applied to stocks and bonds. However, this tax amendment is scheduled to take effect in 2028. The bill has already cleared the Committee on Financial Affairs and is awaiting approval in the Upper House before becoming law, expected to take effect next year.
The Financial Services Agency (FSA) has championed this transition from the Payment Services Act to the Financial Instruments and Exchange Act, reflecting a regulatory intent to treat crypto as distinct financial products separate from traditional securities. The bill also introduces enhanced requirements for crypto exchanges, including stricter oversight, disclosure obligations about handled assets, insider trading restrictions, and tougher penalties for operating without registration.
Under the proposed rules, crypto issuers must disclose detailed information during offerings and secondary distributions, increasing transparency. This regulatory framework aims to protect investors by imposing rules common in financial markets, ensuring that digital asset transactions meet rigorous standards.
By moving crypto trading under established financial legislation, Japan could become a more attractive market for crypto-related investment products, notably ETFs tracking crypto assets—options currently limited in the country. Such developments may pave the way for broader adoption and institutional participation in Japan's crypto sector.