Japan’s House of Councillors passed an amendment to the Financial Instruments and Exchange Act, which officially recognizes cryptocurrencies as financial products rather than payment tools.
With this, the country is now planning to cut crypto taxes from 55% to 20% and open the door to Bitcoin ETFs.
Japan Moves Crypto Under Financial Product Rules
Japan’s parliament has officially passed a landmark law amendment reclassifying cryptocurrencies as “financial assets.” Until now, cryptocurrencies have been mainly regulated under the Payment Services Act as a payment method.
Under the new law, Bitcoin, Ethereum, XRP, and other cryptocurrencies will be classified as financial products under the Financial Instruments and Exchange Act (FIEA), bringing them closer to stocks and other investment assets.
The new law also clears the way for spot crypto ETFs in Japan.
Regulators are aiming to launch them on the Tokyo Stock Exchange by 2027 or 2028, while major firms like Nomura Holdings and SBI Holdings are already preparing crypto ETF products.
List of Changes Under the New Law
The new framework introduces several rules that already apply to traditional financial markets. These include,
- Insider trading ban: Trading using non-public information will be strictly prohibited.
- Annual disclosures: Token issuers must publish annual operational and financial disclosures.
- Strict penalties: Violators face up to 10 years in prison or 10 million Japanese yen fines.
- Retail investment cap: High-risk tokens will have a 2 million Japanese yen retail investment limit
Bigger Fines and Lower Crypto Taxes
The new law also brings stricter rules for the crypto industry. However, the maximum jail term for running an illegal crypto business will increase from three years to 10 years.
And the maximum fine will also increase from 3 million yen to 10 million yen, approximately $18,500 to $61,600. The government says these changes will help make the crypto market safer and protect investors.
Along with the bill, lawmakers are planning to cut the tax on crypto profits from the current maximum of 55% to a flat 20%, the same tax rate used for stock investments.
Another planned change is a three-year loss carryforward. This means investors will be able to use their past trading losses to reduce taxes on future crypto profits. If approved, these tax changes are expected to start in 2028.
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