Japan Moves to Redefine Crypto Under Securities Law, Paving Way for ETFs and Lower Taxes

Japan’s Financial Services Agency (FSA) has proposed a landmark reclassification of cryptocurrencies as financial products under the Financial Instruments and Exchange Act (FIEA) in a move poised to transform the country’s digital asset landscape.

Introduced on June 24, the proposal seeks to align crypto assets with traditional securities and investment products — a shift that could open the door for the launch of crypto exchange-traded funds (ETFs) in Japan. Crucially, the FSA also aims to introduce a flat 20% tax rate on crypto income, replacing the current progressive system where gains are taxed as high as 55%.

This regulatory overhaul is part of Japan’s broader “New Capitalism” strategy, which emphasizes investment-led growth and innovation. The FSA cited growing interest in cryptocurrencies as viable investment assets, revealing that as of January 2025, over 12 million crypto accounts were active in the country, with holdings exceeding 5 trillion yen (approximately $34 billion). Notably, crypto participation now outpaces that of foreign exchange and corporate bonds among retail investors.

By recognizing digital assets under the FIEA, Japan would be positioned to mirror developments in global markets, where institutional adoption of crypto is accelerating. The FSA referenced recent data showing more than 1,200 financial institutions — including Goldman Sachs and U.S. pension funds — now hold U.S.-listed spot Bitcoin ETFs. Japan’s regulators are looking to foster similar momentum domestically.

The proposal also arrives amid growing interest in stablecoins and tokenized real-world assets. In April, Japan’s FSA released a discussion paper proposing a new regulatory framework for digital assets titled “Verification of the State of the System Related to Crypto Assets.” The paper suggests classifying cryptocurrencies into two categories based on fund distribution.

Meanwhile, Japan’s commitment to stablecoin innovation continues to advance. In March, SBI VC Trade — a subsidiary of SBI Holdings — became the first firm licensed to handle stablecoins in Japan. The company is currently preparing to support Circle’s USDC.

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