Japan to Reclassify Crypto Assets as Financial Products and Lower Taxes
Regulators in Japan are planning to classify cryptocurrencies as “financial products” under the Financial Instruments and Exchange Act, introducing tax reform for the sector. This move aims to bring digital assets, such as Bitcoin and Ethereum, under the same legal framework as stocks and bonds, subjecting them to investor protection regulations and stricter market conduct standards.
According to local media, the Japanese Financial Services Agency (FSA) wants to reclassify 105 cryptocurrencies, which would require exchanges to clearly present information such as the token’s issuer, underlying blockchain infrastructure, and historical volatility. This change would also introduce a flat 20% capital gains rate, bringing cryptocurrencies in line with the tax treatment of traditional financial instruments.
Current Framework and Proposed Changes
Currently, cryptocurrencies in Japan are taxed as “other income,” with high-income traders subject to tax rates of up to 55%. The proposed law aims to change this, with the FSA pushing for a flat 20% capital gains rate. This move is expected to make Japan’s crypto market more attractive to investors and institutions, which have been deterred by the current high tax burdens and strict supervisory measures.
The FSA is also focusing on supervision, with preventing insider trading a key concern. The agency wants to ban trading activities based on non-public information and introduce penalties for violations under the bill. The proposal is expected to be discussed in the regular parliamentary session in 2026.
Japan’s Pro-Crypto Approach
Japan has been at the forefront of cryptocurrency regulation, with former Prime Minister Shigeru Ishiba describing cryptocurrencies as extremely important in addressing Japan’s social and economic challenges. Current Prime Minister Sanae Takaichi is also seen as a proponent of new technologies, and her government is expected to continue the country’s tech-friendly direction.
Japanese regulators are also considering whether banks should be allowed to purchase and hold cryptocurrencies. The FSA is reviewing restrictions that currently ban banks from adding cryptocurrencies to their balance sheets due to volatility concerns. Additionally, the country is conducting the Payment Innovation Project, an effort that supports the joint initiative of major banks to issue yen-based stablecoins and test blockchain-powered settlement systems for institutional payments.
For more information on Japan’s plans to reclassify crypto assets as financial products and lower taxes, visit https://crypto.news/japan-to-reclassify-crypto-assets-as-financial-products-and-lower-taxes/
