A New Regulatory Framework

Japanese regulators are planning a significant overhaul of the country’s cryptocurrency laws, aiming to classify digital assets as “financial products” under the Financial Instruments and Exchange Act. According to local media, Japan’s Financial Services Agency (FSA) intends to place 105 cryptocurrencies, including Bitcoin and Ethereum, under the same legal category as stocks and bonds. This move would introduce stricter investor protection rules and more robust market conduct standards.

Under the proposed framework, crypto exchanges would be required to provide mandatory disclosures for listed assets. This includes clear information on a token’s issuer, its underlying blockchain infrastructure, and its historical price volatility, bringing greater transparency to the market. The FSA also plans to tighten controls to prevent insider trading, with formal penalties for those who trade on non-public information.

Major Overhaul Proposed for Crypto Taxes

The proposed changes also include a significant tax reform for crypto investors. Japan’s current system treats cryptocurrency gains as “miscellaneous income,” subjecting high-earning traders to tax rates as high as 55%—one of the most punitive tax regimes in the world. This rigid framework has been cited as a factor stifling both retail and institutional investment.

The FSA is now pushing for a flat 20% capital gains tax on crypto profits. This would align the tax treatment of digital assets with that of traditional financial instruments, creating a more favorable environment for investors. The legislative proposal is expected to be formally discussed during a parliamentary session in 2026.

Part of a Wider Pro-Technology Push

This regulatory shift is part of a broader, pro-crypto approach from the Japanese government. The effort gained momentum under former Prime Minister Shigeru Ishiba, who highlighted the importance of cryptocurrencies in addressing national economic challenges. The current administration of Prime Minister Sanae Takaichi is expected to continue this supportive stance on emerging technologies.

In addition to the tax and classification changes, Japanese regulators are also re-evaluating rules that currently bar banks from holding cryptocurrencies on their balance sheets. The FSA is reviewing these restrictions and may allow banks to participate in the market under strict risk management conditions. The country is also actively exploring stablecoins through its Payment Innovation Project, which supports a joint initiative by major banks to issue yen-based stablecoins for institutional settlements.