Japan has advanced legislation that would cut crypto taxes to 20%, introduce ETF pathways, and place digital assets under the same regulatory framework as stocks.
Summary
- Japan’s lower house has approved a bill that would classify cryptocurrencies as financial instruments and pave the way for crypto ETFs.
- The proposal would reduce the tax rate on crypto gains to 20% and introduce stricter insider trading and compliance rules.
- Rising institutional interest comes as major Japanese banks prepare stablecoin projects and regulators move toward a clearer crypto framework.
According to Bloomberg, Japan’s lower house approved a bill on Thursday that would classify cryptocurrencies as financial instruments under the Financial Instruments and Exchange Act, bringing the sector closer to traditional securities markets. The proposal is expected to move through the upper house before taking effect next year.
Once implemented, the legislation would reduce the tax treatment of crypto gains from the current maximum rate of 55% to a flat 20%, matching stocks and bonds. The tax changes are expected to take effect in 2028.
Officials have framed the reforms as part of a larger effort to establish clearer rules for digital asset trading while responding to growing participation from institutions and retail investors.
“We aim to foster more innovation by creating a sound trading environment,” Masato Yoshizawa, a representative from Japan’s Financial Services Agency policy and markets bureau, told Bloomberg.
Yoshizawa added that regulators were seeking healthy market growth rather than endorsing crypto assets themselves.
Japan prepares for ETFs and tighter oversight
For local investors, the proposed changes could open access to crypto exchange-traded funds, an investment product that has not yet been available in Japan. Bloomberg reported that Japan Exchange Group expects crypto-linked ETFs could begin listing as early as next year if the legal framework moves forward.
The proposal builds on reforms approved earlier this year. In April, Japan passed amendments to the Financial Instruments and Exchange Act that formally reclassified crypto assets as financial instruments and introduced restrictions on insider trading, according to previous government disclosures.
Under the latest bill, penalties for crypto insider trading would be aligned with those applied to listed securities. Authorities also plan to increase the maximum prison sentence for unregistered crypto sellers from three years to 10 years.
Speaking to Bloomberg, Koichi Kano, Japan head at Singapore-based crypto market maker QCP Group, said the legislation provides long-awaited clarity for market participants. QCP expanded its presence in Japan earlier this year by appointing Kano, a former Citigroup foreign exchange executive, as its first local representative.
Additional disclosure obligations are also expected to apply to crypto issuers. Earlier amendments introduced annual reporting requirements and increased penalties for exchanges operating without licenses.
Hinza Asif, president of the Asia Web3 Alliance, told Bloomberg that stronger enforcement measures could help create a more trusted environment for participants entering the market.
Stablecoin projects gain momentum
Alongside crypto market reforms, Japanese financial institutions have continued building regulated digital asset infrastructure.
Earlier this week, MUFG Bank, Sumitomo Mitsui Banking Corporation and Mizuho Bank announced plans to begin live transactions using a jointly issued stablecoin during fiscal 2026. The project follows an FSA-backed pilot that tested stablecoin issuance and cross-border payments in late 2025.
Stablecoins will remain regulated under Japan’s payment services framework rather than the proposed securities regime. For assets such as Bitcoin and Ether, however, the new legislation would create a path toward regulated ETF products and expanded institutional participation.
