Japan’s Financial Services Agency (FSA) has unveiled a proposal that could transform the crypto landscape. By bringing crypto assets under the Financial Instruments and Exchange Act, the plan could legalize Bitcoin exchange-traded funds (ETFs) and slash crypto profit taxes from a steep 55% to a flat 20%.
Japan’s New Regulatory Framework
The FSA’s proposal seeks to reclassify digital assets as financial products, moving them from the Payment Services Act to the stricter Financial Instruments and Exchange Act. This shift would treat crypto like stocks, enabling Bitcoin ETFs, which are currently banned in Japan. It also proposes a flat 20% tax on crypto gains, replacing the current “miscellaneous income” category that taxes profits up to 55%.
The plan will be reviewed by the Financial System Council on June 25, 2025, to assess its feasibility and investor protections. If approved, the FSA will draft a bill for parliamentary submission in 2026, with public feedback collected until March 31, 2026, to refine the reforms. Legislative amendments could take effect by late 2026, aligning Japan with global crypto trends.
Benefits of the Regulatory Framework
If signed into law, the proposal could draw global investors by aligning Japan’s crypto taxes with stock investments, making trading more affordable. Bitcoin ETFs would offer safer investment options for institutions, boosting market liquidity and legitimacy. Japan’s regulatory stance balances innovation with protection, requiring crypto firms to disclose operations to prevent fraud, a response to incidents like the 2025 hack of a major exchange.
Stricter rules under the Financial Instruments and Exchange Act would enhance transparency, positioning Japan as a trusted crypto market. The FSA’s proactive approach, including closed-door talks with experts, reflects its commitment to fostering a secure yet vibrant digital asset ecosystem.
Meanwhile, similar regulatory reforms globally have sparked change. For example, in the U.S., SEC Chair Paul Atkins announced policies to reduce regulatory barriers for decentralized finance (DeFi) platforms, marking a significant departure from the previous administration’s enforcement-heavy approach.
Similarly, South Korea has allowed institutions, including universities and local governments, to cash out donated and confiscated crypto starting this year. Notably, the authorities previously blocked them from opening such accounts.
