Japan’s Financial Services Agency (FSA) is preparing a significant shift in its cryptocurrency regulations, aiming to reduce the tax rate on digital asset gains and consider the approval of Bitcoin exchange-traded funds (ETFs).
If these measures are implemented, they could reshape the country’s crypto landscape, aligning it more closely with global financial markets.
Crypto Tax Cut and Regulatory Overhaul
The FSA is proposing a tax reduction that would lower the rate on cryptocurrency earnings from as high as 55% to a flat 20%, bringing it in line with the country’s standard financial income tax rate. Currently, crypto profits are classified as “miscellaneous income,” resulting in higher tax burdens for investors. This move could encourage greater participation from both retail and institutional investors, making Japan a more competitive market for digital assets.
In addition to tax reforms, Japan is considering reclassifying cryptocurrencies under the Financial Instruments and Exchange Act (FIEA), treating them more like traditional securities. Presently, digital assets are governed under the Payment Services Act (PSA), which views them primarily as payment instruments. This potential shift would introduce stricter oversight, requiring companies to adhere to financial disclosure requirements similar to those imposed on stock market securities.
According to reports from Nikkei, the FSA has been conducting closed-door meetings with industry experts to assess the current regulatory framework. The agency is expected to announce its policy direction by June 2025, with any legislative amendments likely to be introduced in the 2026 Diet session.
Potential Approval of Bitcoin ETFs
Another major policy shift under discussion is the approval of Bitcoin spot ETFs. This follows the U.S. Securities and Exchange Commission’s (SEC) recent decision to approve both Bitcoin and Ethereum spot ETFs. Japan’s move to consider a similar path signals an effort to align with global investment trends and broaden the accessibility of digital assets.
A study group convened in October 2024 recommended that initial ETF approvals should focus on Bitcoin and Ethereum, the two most established cryptocurrencies. The group also suggested separate tax treatment for spot trading and ETFs, though the specifics remain under discussion.
Institutional players are already positioning themselves ahead of these anticipated regulatory changes. SoftBank, one of Japan’s leading financial firms, has expanded its footprint in the crypto sector, investing in Cipher Mining and securing an option for a major data center in Texas. The company recently reported a 7.4% rise in net income for the first nine months of 2024, reaching 436.6 billion yen, signaling increased confidence in digital assets.
While Japan appears poised for a more crypto-friendly regulatory environment, it remains committed to financial stability. The FSA is also strengthening anti-money laundering measures, ensuring that any new policies protect investors while fostering innovation. The agency plans to release detailed guidelines for public comment by April 2025, allowing stakeholders to weigh in before final implementation.
If approved, these changes could attract international crypto firms to Japan, positioning the country as a leading hub for digital asset investments. As Japan navigates these policy shifts, the coming months will be critical in shaping its role in the evolving global cryptocurrency market.
