Japan has approved one of its most significant cryptocurrency reforms to date after the House of Councillors passed amendments to the Financial Instruments and Exchange Act (FIEA) on July 15. The vote completes the bill’s passage through both chambers of the National Diet, officially recognizing cryptocurrencies as financial products rather than primarily payment instruments.
The legislation marks a major shift in Japan’s regulatory approach to digital assets. Previously governed under the Payment Services Act (PSA), cryptocurrencies will now fall under the Financial Instruments and Exchange Act, bringing them closer to the regulatory framework applied to traditional securities and investment products.
- Japan officially classifies cryptocurrencies as financial products under FIEA.
- New rules introduce insider trading restrictions and stricter disclosure requirements.
- The reforms lay the foundation for crypto ETFs and a flat 20% tax on crypto gains.
Stronger Oversight for Digital Assets
Under the new framework, insider trading laws will apply to cryptocurrency markets, making it illegal to trade digital assets using material non-public information. The reform also requires issuers of certain crypto assets to publish annual disclosures, a measure designed to improve transparency and strengthen investor confidence.
Japan has also introduced tougher penalties for businesses operating without proper registration. The maximum prison sentence for unregistered crypto activities will increase from three years to ten years, while the maximum financial penalty will rise from 3 million yen to 10 million yen, or roughly $61,600.
Pathway for ETFs and Tax Reform
Beyond strengthening market oversight, the legislation creates the legal foundation for broader institutional participation in Japan’s digital asset sector. The reforms are expected to support the future launch of domestic cryptocurrency exchange-traded funds (ETFs), although additional regulatory approvals will be required before such products can enter the market.
The law also supports Japan’s planned overhaul of cryptocurrency taxation. Policymakers are preparing to introduce a flat 20% tax on crypto gains, replacing the current progressive tax system. The revised tax framework is expected to take effect from January 2028, with implementation beginning during fiscal 2027.
The legislation aligns with Japan’s broader Web3 and innovation strategy, which aims to attract 10 trillion yen (approximately $68 billion) in annual startup investment by fiscal 2027. By modernizing its regulatory framework, Japan is seeking to strengthen investor protections while positioning itself as one of the world’s leading jurisdictions for regulated digital asset innovation.
Solana Foundation has acquired a strategic stake in SBI R3 Japan, deepening its partnership with Japan’s financial sector to accelerate the adoption of blockchain-powered financial infrastructure. The investment aims to advance on-chain finance by supporting tokenized assets, digital payments, and enterprise blockchain solutions for banks and financial institutions across Japan.
