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In a significant regulatory shift for Japan’s cryptocurrency market, the Financial Services Agency (FSA) is planning to redefine certain digital assets as “financial products” and reduce the top tax rate on crypto gains from 55% to a flat 20%.
This move, reported by major Japanese media such as the Asahi Shimbun, would apply to approximately 105 cryptocurrencies, including major tokens such as Bitcoin (BTC) and Ethereum (ETH).
What’s Changing?
Under current Japanese law, profits from cryptocurrency trading are treated as “miscellaneous income” and can incur tax rates up to 55% when combined with national and local taxes.
The proposed reforms would:
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Reclassify eligible crypto-assets as financial products under the Financial Instruments and Exchange Act (FIEA).
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Require more rigorous disclosure by exchanges listing these assets such as issuer information, underlying blockchain tech and volatility profiles.
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Bring the tax treatment of these approved crypto-assets in line with that of stocks, with a flat 20% capital gains rate for qualifying transactions.
The reforms are expected to be introduced in a parliamentary bill during Japan’s regular Diet session in 2026.
Why This Matters
For years, Japan’s heavy tax burden on crypto trading has been cited as a major deterrent for retail and institutional participation. Reducing the tax rate to 20% could significantly improve investment incentives.
Moreover, treating crypto as financial products opens the door for banks, insurers and other traditional financial institutions to offer crypto-related services under regulated frameworks. This signals a strategic shift from being a cautious regulator to wanting to integrate digital assets more deeply into the financial system.
Considerations & Potential Risks
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The 20% rate applies only to the “approved” list of 105 assets; smaller or risk-ier crypto-tokens may continue to face the higher “miscellaneous income” tax rates.
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The obligation on exchanges and issuers to meet disclosure and compliance standards could increase costs and may lead to delistings of non-compliant tokens.
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Implementation timing matters: until the law passes and regulations are finalised, uncertainty remains for investors.
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Regulatory oversight will remain stringent – insider-trading rules and market-abuse controls will apply under the reclassification.
What to Watch Next
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Final text of the legislative bill from the Japanese government, expected in 2026.
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Which 105 crypto-assets are approved and qualify for the new tax rate and financial product status.
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How Japanese exchanges adapt to new disclosure and compliance requirements.
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Reactions from institutional investors: will lowered tax rates and regulatory clarity drive increased Japanese crypto participation?
FAQs
Q1: What exactly is Japan’s FSA proposing in terms of crypto classification?
The FSA proposes to reclassify 105 crypto-assets, including major tokens, as “financial products” under the Financial Instruments and Exchange Act, thereby subjecting them to securities-style oversight, disclosure and market-abuse rules.
Q2: What tax changes are included in the proposal?
Profits from approved crypto-assets would be taxed at a flat 20% capital gains rate, replacing the current rate of up to 55% for cryptocurrency income in Japan.
Q3: Does this tax rate apply to all cryptocurrencies?
No; the flat 20% rate applies only to the 105 –asset list that meet the new regulatory requirements. Other less-qualifying tokens may still face the higher miscellaneous income rates.
Q4: When will these changes take effect?
The proposed law is expected to be submitted during Japan’s 2026 parliamentary session. Until then, current rules remain in force.
Q5: Why is Japan making these changes now?
The changes aim to modernise the crypto-regulatory framework, attract more institutional and retail participation, and align tax treatment and oversight of crypto with traditional financial instruments.
Q6: What does this mean for investors in Japan?
If implemented, the lower tax rate and clearer regulatory classification could make Japan more attractive for crypto investing. However, investors should monitor which assets qualify, regulatory updates and maintain tax compliance.