Japanese authorities have announced plans to reform taxation and regulation of cryptocurrencies, which may significantly alter the digital asset market in the country.
Tax Relief to Encourage Adoption
Currently, crypto gains are classified as 'miscellaneous income' in Japan and taxed progressively, with effective rates exceeding 50 percent in some cases. By contrast, equities and bonds face a flat 20 percent levy. The FSA is now proposing to shift cryptocurrencies into that same 20 percent category, starting in fiscal 2026. Losses could also be carried forward for up to three years, giving investors the same benefits they already enjoy with stocks. Policymakers believe this parity will reduce barriers and unlock higher trading activity.
Legal Shift to Enable ETFs
The second part of the reform involves amending securities law to officially classify crypto as a financial product. That would allow the FSA to impose disclosure requirements, apply insider-trading rules, and extend investor protections under the Financial Instruments and Exchange Act. More importantly, it would open the door for spot Bitcoin and other crypto ETFs, products that are not yet available in Japan but are expected to attract significant demand.
Building a Digital Finance Bureau
Alongside legal reforms, the FSA also plans to create a dedicated bureau for digital finance and insurance. The agency argues that crypto has grown too intertwined with traditional finance to be managed in isolation. Centralizing oversight reflects Japan’s cautious but steady embrace of innovation while maintaining strict consumer safeguards.
The upcoming reforms in the cryptocurrency sector could change the perception of digital assets in Japan and attract both retail and institutional investors, potentially making the country an important player in the Asian crypto market.
