Key Takeaways
- Japan’s FSA wants to classify crypto as a financial product under new securities law.
- The proposal could pave the way for long-awaited crypto ETFs and lead to lower taxes on crypto profits.
- Crypto adoption in Japan has steadily increased over the past few years.
Japan’s Financial Services Authority (FSA) wants to reclassify the status of crypto as a financial product under the proposed Financial Instruments and Exchange Act.
According to the June 24 proposal by the FSA, the move is part of a broader government effort to align the country’s financial system with the emerging “New Capitalism” strategy, which aims to transform the country into a more investment-driven economy.
Cut down on Japan’s High Crypto Tax Rate
If the change to reclassify cryptocurrency as a financial product rather than simply a payment method is approved, it could clear the path for cryptocurrency exchange-traded funds (ETFs), something Japan’s cryptocurrency community has been calling for since ETFs first gained popularity globally. The proposal goes further to recommend reducing Japan’s high crypto tax rate from its current high of 55% to a flat fee of 20%, a measure that would align it with the capital gains tax on stocks and other securities.
The proposals by the FSA are outlined in a newly launched policy document dubbed “Considerations Regarding the Structure of the System Surrounding Crypto Assets (Virtual Currencies).” The regulator also announced plans to form a dedicated working group to develop updated cryptocurrency rules. The shift to classify crypto as a financial product signals a significant departure from the country’s earlier approach towards crypto asset regulation. While the government was among the first to pass crypto regulation, Japan banned investment products like crypto ETFs and enforced aggressive taxation, discouraging institutional adoption.
Regulatory Momentum and Rising Retail Demand
However, the ongoing global regulatory momentum and rising retail demand may have caused Japan to reverse its course. As of January 2025, there were over 12.1 million active domestic crypto accounts with crypto holdings on platforms exceeding $34 billion. The FSA states that crypto ownership has surpassed participation in traditional instruments, such as FX trading and corporate bonds, particularly among younger, tech-savvy investors.
With the proposal that classifies crypto as a financial product, the country now aims to join the same league as the United States, where Bitcoin and Ethereum ETF products have achieved significant success. Citing data from March 2025, the FSA stated that over 1,200 financial institutions, including US pension funds and Goldman Sachs, now hold U.S.-listed spot Bitcoin ETFs.
Conclusion
Japan’s decision to classify crypto as a financial product is echoing a similar shift in the US, where the country, under a pro-crypto president, has taken several similar moves. The 2024 re-election of Donald Trump incentivized a broad policy shift across the US, with crypto ETFs gaining approval and banks relaxing restrictions on interacting with digital assets. The ongoing momentum has had a ripple effect internationally, with South Korea now reconsidering earlier bans and restrictions on ETFs. The combination of regulatory clarity and tax relief could make it one of the most crypto-friendly major economies globally.
Frequently Asked Questions
Is Japan a crypto-friendly country?
Japan was one of the first countries to regulate crypto exchanges under its Payment Services Act (PSA) in 2017
What is the cryptocurrency policy in Japan?
Japan is actively developing its legal and tax regimes for crypto-assets. There are ongoing proposals advocating for the classification of crypto-assets as a distinct asset class under the Financial Instruments and Exchange Act (FIEA).
What are the tax rules for crypto in Japan?
Gains from cryptocurrency transactions are treated as miscellaneous income and are subject to income tax. The tax rate for cryptocurrency gains is the same as your regular income tax rate, which ranges from 15% to 55%
