Japan Approves Bill Recognizing Crypto as Financial Asset

• Japan’s parliament advances move to reclassify crypto as a financial instrument.
• It introduces mandatory disclosures and a flat 20% capital gains tax.
• The shift opens the door to regulated crypto ETFs in Japan for the first time.

Japan’s Financial Services Agency has advanced a bill to reclassify cryptocurrency as a financial asset under the Financial Instruments and Exchange Act. The legislation is currently moving through parliament, with a final vote expected in the coming months.

Japan has regulated crypto longer than most countries. In 2017, it became the first major economy to recognize cryptocurrency as a legal payment method under the Payment Services Act. Exchanges were required to register with the FSA, maintain segregated customer accounts, and comply with anti-money laundering rules.

That framework worked for its time. But it was built for payments, not investments. Crypto gains fell under miscellaneous income, taxed at progressive rates reaching up to 55%. Notably, Exchanges faced no disclosure requirements. Investors had little legal protection if they were misled.

As crypto grew into an investment market, regulators took notice. By early 2025, Japan had over 12 million registered crypto accounts, with total customer deposits exceeding 5 trillion Japanese yen.

What the New Bill Changes

The FSA’s proposed changes move crypto from the payment law into the same legal category as stocks and bonds. The shift is significant on several levels.

Exchanges must now publish detailed disclosures on each listed token. Japan currently permits about 105 cryptocurrencies on licensed platforms, including Bitcoin and Ether. Each issuer will face reporting obligations similar to those applied to public companies.

Additionally, insider trading rules will apply to crypto for the first time. Anyone with access to non-public information,  such as advance knowledge of a token listing or a major technical incident, will be barred from trading on that information.

The tax structure will also change. The current progressive rate of up to 55% will be replaced with a flat 20% capital gains tax. Investors will also be allowed to carry forward losses for up to three years, offsetting future gains.

Interestingly, crypto exchange operators will be held to the same conduct standards as licensed securities brokers. This includes stricter customer protection rules and higher business compliance requirements.

What’s Next 

The bill also clears a path for regulated spot Bitcoin and Ether ETFs in Japan, a product that regulators had previously held back due to the legal ambiguity around token classification.

Japan’s shift mirrors moves already underway in the United States, Hong Kong, and the UAE, where digital assets are gaining formal recognition within traditional financial systems. The FSA coordinated with Japan’s Ministry of Finance to align the country’s tax policy with the new investment-based framework.

Related: Japanese 10Y JGB Yields Hit 2.40% Multi-Decade High, Pressuring Bitcoin and Altcoins