Japan is quietly taking the most aggressive pro-crypto regulatory step among G7 nations, with the Financial Services Agency (FSA) drafting a sweeping reclassification that would treat digital assets like Bitcoin and Ethereum as “financial products,” according to local reports.
If enacted, this overhaul—expected to be submitted to the Diet in 2026—would align cryptocurrencies with stocks and investment funds under the country’s core securities law, the Financial Instruments and Exchange Act (FIEA).
The Key Shifts
The proposed framework centers on three major changes designed to bring institutional credibility and capital back to the domestic market:
- Tax Parity: Crypto gains on approved tokens would be subject to a flat 20% capital gains tax, aligning it with equities. This is a dramatic drop from the current system, where crypto profits are taxed as miscellaneous income at marginal rates that can reach 55%, a major deterrent to long-term holding and domestic custody.
- Regulatory Recategorization: Approved tokens, including BTC and ETH, would fall under FIEA, triggering crucial safeguards like insider trading rules and issuer disclosures. This move signals to major Japanese banks, insurers, and brokerage arms that these assets are now within their compliance perimeters, potentially paving the way for them to offer crypto exposure directly to clients.
- Institutional Gatekeeping: The FSA is reportedly creating a whitelist of approximately 105 tokens that meet the standards for this new classification. This creates a bifurcated market: approved assets gain access to bank-grade custody and stock-like taxation, while non-listed tokens face tighter restrictions.
Why the Shift Now?
For years, crypto in Japan has been tolerated but heavily taxed and kept at arm’s length by major financial institutions. The current push by the FSA is seen as a deliberate move to address past failures (like the fallout from Mt. Gox and Coincheck) and rebuild the framework with institutional trust.
By fixing the decisive lever of after-tax returns, the government aims to encourage domestic custody and prevent capital migration offshore. If banks and insurance groups are cleared to offer crypto products under existing investment frameworks, it could unlock institutional allocation currently unavailable in other G7 countries.
