Japan Moves to Regulate Crypto as Financial Products in Major FSA Overhaul

Japan’s Financial Services Agency (FSA) is moving to bring top cryptocurrencies under the same regulatory framework that governs stocks, according to a report from local news outlet Asahi Shimbun.

If implemented, the plan would see 105 cryptocurrencies traded on Japanese crypto exchanges, including Bitcoin and Ethereum, classified as ‘financial products’ under the nation’s Financial Instruments and Exchange Act. That would result in much tighter disclosure requirements and potentially a significantly reduced tax rate on crypto.

Under the FSA’s plan exchanges would be required to disclose detailed information about the cryptocurrencies they list, including the identity of the issuer (if known), information about the underlying technology, and volatility reports.

The FSA is scheduled to bring its proposal before Japan’s main parliamentary sitting in 2026 for consideration and possible approval.

Related: Japan Launches First Regulated Yen Stablecoin as JPYC Goes Live

Changes Could See Japan’s Crypto Tax Rate Plummet

In Japan profits from crypto investments are currently classified as ‘miscellaneous income’, and can attract a tax rate as high as 55% — one of the highest crypto tax rates in the world. Under the FSA’s proposed plan profits on the 105 approved cryptocurrencies would be treated like profits on stocks and re-classified as capital gains, attracting a flat tax rate of just 20%.

The plan would also crack down on insider trading in the crypto market, with individuals and entities holding insider information on a particular cryptocurrency being barred from buying and selling the impacted coin or token.

Move Follows FSA’s Plan to Allow Banks to Hold Crypto

FSA’s digital assets regulatory overhaul follows its plan announced last month to potentially allow Japanese banks to invest in cryptocurrencies.

Since 2020 Japanese banks have effectively been banned from investing in digital assets. But that could change soon with the FSA indicating it intends to create a new framework allowing banks to participate in the crypto market while adhering to stricter capital and risk-management obligations.

Related: Arthur Hayes Says Japan’s Stimulus Could Send Bitcoin to $1 Million

According to the Nikkei, the FSA plan would see existing banking rules re-written to allow securities subsidiaries within banking groups to invest in digital assets, placing them on equal footing with securities company affiliates.