Japan has introduced advanced legislation that would cut taxes on cryptocurrencies to 20%, introduce ETF tracks, and place digital assets under the same regulatory framework as stocks.
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- The Japanese House of Representatives has approved a bill that would classify cryptocurrencies as financial instruments and pave the way for cryptocurrency ETFs.
- The proposal would reduce the tax rate on cryptocurrency gains to 20% and introduce stricter rules for insider trading and compliance.
- The growing institutional interest comes as major Japanese banks prepare stablecoin projects and regulators move toward a clearer framework.
According to Bloomberg, the Japanese House of Representatives consent Thursday’s bill would classify cryptocurrencies as financial instruments under the Financial Instruments and Exchanges Act, bringing the sector closer to traditional securities markets. The proposal is expected to pass through the Senate before taking effect next year.
Once implemented, the legislation will reduce the tax treatment of cryptocurrency gains from the current maximum of 55% to 20%, matching stocks and bonds. The tax changes are expected to take effect in 2028.
Officials have drafted the reforms as part of a larger effort to set 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 of Japan’s Financial Services Agency’s Policy and Markets Office, told Bloomberg.
Yoshizawa added that regulators were seeking healthy growth in the market rather than endorsing crypto assets themselves.
Japan prepares for ETFs and tightening supervision
For local investors, the proposed changes could open up access to cryptocurrency exchange-traded funds, an investment product not yet available in Japan. Bloomberg reported that the Japan Exchange Group expects cryptocurrency-related ETFs to 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 Pass Amendments to the Financial Instruments and Exchanges Act officially reclassified crypto assets as financial instruments and introduced restrictions on insider trading, according to previous government disclosures.
Under the latest draft law, penalties for insider trading of cryptocurrencies will be consistent with those applied to listed securities. Authorities also plan to increase the maximum prison sentence for unregistered cryptocurrency sellers from three years to 10 years.
Speaking to Bloomberg, Koichi Kanno, head of Japan at Singapore-based cryptocurrency 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 Kanoo, former executive director of Citigroup’s foreign exchange division, as its first local representative.
Additional disclosure obligations are also expected to apply to cryptocurrency issuers. Previous amendments introduced annual reporting requirements and increased penalties for exchanges operating without licenses.
Stronger enforcement measures can help create a more trusting environment for participants entering the market, Hinza Asif, head of the AsiaWeb3 Alliance, told Bloomberg.
Stablecoin projects are gaining momentum
Along with cryptocurrency market reforms, Japanese financial institutions have continued to build a regulated infrastructure for digital assets.
Earlier this week, MUFG Bank, Sumitomo Mitsui Banking Corporation and Mizuho Bank Announce It 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 still be regulated under Japan’s Payment Services Framework rather than the proposed securities regime. However, for assets like Bitcoin and Ethereum, the new legislation will create a path toward regulated ETF products and expanded institutional participation.
