Japan Passes Crypto Bill to Cut Bitcoin and Ethereum Tax Rate From 55% to 20%

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• Japan’s House of Representatives passed a bill to classify cryptocurrencies as financial instruments under the Financial Instruments and Exchange Act (FIE).
• Crypto gains tax would fall from a maximum of 55% to a flat 20%, aligning with stocks and bonds.
• Insider trading restrictions will be strengthened, with tougher penalties for violations and unregistered crypto sales.
• The framework could enable crypto exchange-traded funds (ETFs) in Japan.
• The legislation still requires Senate approval before taking effect.

Japan Moves to Bring Crypto Under Financial Instruments Framework

Japan’s House of Representatives has passed legislation that would reclassify cryptocurrencies as financial instruments under the country’s Financial Instruments and Exchange Act (FIE), marking one of the most significant regulatory changes for the sector in recent years.

According to Bloomberg, the bill was approved on Thursday and would place cryptocurrencies under a regulatory framework similar to that applied to stocks and bonds. The measure is designed to create a more structured trading environment while strengthening investor protections and market oversight.

The proposal now moves to the House of Councillors, Japan’s upper chamber, for consideration. If approved, the legislation is expected to be implemented beginning next year, with some tax-related provisions scheduled to take effect in 2028.

Officials from Japan’s Financial Services Agency (FSA) said the objective is to establish a sound trading environment that supports innovation while improving market integrity.

Tax Changes and Stronger Enforcement Measures

A central feature of the legislation is a major revision to the taxation of cryptocurrency investments. Under the current system, crypto gains can be taxed at rates reaching approximately 55% depending on an individual’s income level. The new framework would reduce that burden to a fixed 20% tax rate, bringing cryptocurrency investments in line with the treatment of stocks and bonds.

The legislation also introduces stricter enforcement provisions aimed at preventing market abuse. Insider trading restrictions would be expanded to cover cryptocurrency markets, reflecting rules already applied to traditional financial instruments.

In addition, the maximum penalty for unregistered cryptocurrency sellers would increase from three years to ten years, significantly raising the legal consequences for regulatory violations.

Stablecoins will remain regulated separately as payment services and will not be subject to the new financial instruments framework outlined in the bill.

Crypto ETF Path Opens as Industry Faces Potential Reshaping

The proposed regulatory changes are expected to create a pathway for cryptocurrency exchange-traded funds in Japan. The operator of the Tokyo Stock Exchange has indicated that a crypto-tracking ETF could potentially be listed as early as next year if the regulatory framework is finalized.

The legislation arrives as global markets continue to expand access to regulated crypto investment products, including spot cryptocurrency ETFs that have gained traction in several major jurisdictions.

The new rules could also reshape Japan’s cryptocurrency exchange sector. Industry consolidation may accelerate under the tighter regulatory framework, with some estimates suggesting that roughly half of existing exchanges could ultimately exit the market.

The legislation follows a series of recent digital asset and financial technology initiatives in Japan. Earlier this year, major Japanese banks outlined plans for a joint stablecoin launch targeted for fiscal 2026, while prediction market platform Polymarket announced ambitions to enter the Japanese market by 2030.

In May, lawmakers from Japan’s Liberal Democratic Party (LDP) also unveiled a policy vision promoting the use of artificial intelligence and blockchain technologies within the country’s financial sector, highlighting continued efforts to modernize Japan’s digital economy.

The regulatory changes also come as other Asia-Pacific jurisdictions advance digital asset tax frameworks. South Korea recently confirmed that its virtual asset tax regime will begin in January 2027, while Australia is considering capital gains tax reforms that could affect cryptocurrency investors and digital asset holdings.

These developments highlight a broader regional effort to establish clearer regulatory and tax treatment for cryptocurrencies as governments seek to balance innovation, investor protection, and market oversight.

The bill represents the latest step in Japan’s evolving approach to digital asset regulation, balancing investor protection measures with efforts to support innovation and broader participation in regulated cryptocurrency markets.