Japan Moves to Reclassify Crypto as the country prepares for one of its most significant policy shifts in years, with regulators planning to classify more than 100 cryptocurrencies as “financial products” — a change that could influence everything from how tokens are traded to how much investors pay in taxes.
The country’s Financial Services Agency (FSA) is reportedly working on a plan to bring 105 crypto assets under the Financial Instruments and Exchange Act — the same rulebook that governs traditional products like stocks and bonds. If approved, this would introduce stronger investor protections and clearer standards for companies operating in the sector.
What the New Classification Means
Once these assets fall under the financial product umbrella, exchanges will be required to publish more detailed disclosures for tokens listed in Japan. That includes information about the issuer, the blockchain powering the asset, historical volatility, and other risk factors. Regulators believe this will make the market more transparent and limit unfair practices.
This shift also sets the stage for a long-awaited update to Japan’s crypto tax system.
A Much-Needed Tax Overhaul
Japan has long been known for strict rules and some of the highest tax burdens on crypto gains. Currently, digital assets are treated as “miscellaneous income,” meaning wealthy investors can face tax rates as high as 55%.
The FSA now wants to change that. The agency is pushing for a flat 20% capital gains tax on approved cryptocurrencies — aligning digital assets with the tax treatment of more traditional investments. Discussions around this reform began earlier this year, when the FSA released a policy paper suggesting the sector be moved under financial product regulations.
If lawmakers approve the proposal, investors would finally see relief from one of the world’s toughest crypto tax regimes.
Stricter Oversight and Insider Trading Rules
Alongside the tax changes, regulators are looking to tighten controls on insider trading within the crypto market. The FSA wants to ban trading based on non-public information and implement formal penalties for those who break the rules. These measures are expected to be part of the same legislative package set for debate in Japan’s 2026 parliamentary session.
A Government That Supports Crypto Innovation
Japan’s broader push toward crypto reform has roots in earlier administrations. Former Prime Minister Shigeru Ishiba highlighted digital assets as essential tools for solving the nation’s economic challenges. Current Prime Minister Sanae Takaichi is also seen as pro-technology, and her administration is expected to continue encouraging innovation.
Regulators are additionally reviewing whether banks should be allowed to hold cryptocurrencies — a rule that has been restricted since 2020 due to volatility concerns. The FSA may soon ease that stance, allowing banks to handle crypto under strict risk controls.
On top of that, Japan continues to advance stablecoin development through its Payment Innovation Project, which is supporting major banks as they experiment with yen-backed stablecoins and blockchain-based payment rails.
With tax reform, expanded classifications, and a government open to innovation, Japan is positioning itself as one of the most progressive crypto hubs in Asia.
Also Read: Crypto in 2025: A Healthy Pause or a Worrying Stall?
