Japan Plans 20% Flat Tax on Crypto Gains, Paving Way for ETFs

• Japan’s Financial Services Agency (FSA) to propose 20% flat tax on crypto gains, aligning with stock taxation.
• Move could unlock domestic crypto ETFs and boost industry competitiveness.
• Japan is preparing to approve its first regulated yen-pegged stablecoin in fall 2025.

Japan’s Financial Services Agency (FSA) is preparing to overhaul how the nation taxes cryptocurrencies, aiming to apply a flat 20% levy on gains from digital asset trading — the same rate used for listed stocks. The reform could mark a turning point for Japan’s crypto sector, aligning the asset class with traditional financial products and potentially opening the door to exchange-traded funds (ETFs).

According to a Nikkei report, the FSA will request revisions to the tax code for the 2026 fiscal year. Currently, crypto income falls under “miscellaneous income,” subject to progressive rates that can reach as high as 55%, excluding local levies. The shift to a unified 20% tax would simplify compliance and potentially encourage broader adoption among retail and institutional investors.

Industry groups are also lobbying for a three-year loss carry-forward provision, which would further bring crypto taxation in line with equity markets.

Beyond taxation, the FSA’s reform could pave the way for the introduction of domestic crypto ETFs, a product long sought by Japanese market participants. The agency is reportedly drafting a 2026 legislative bill to reclassify crypto assets as “financial products” under the Financial Instruments and Exchange Act, rather than treating them merely as a “means of payment” under the Payment Services Act. This legal adjustment would create a clearer regulatory framework for investment products tied to digital assets.

Stablecoin Approval on the Horizon

Separately, the FSA is preparing to approve Japan’s first domestically regulated yen-pegged stablecoin, JPYC, as early as this fall. Issued by Tokyo-based fintech firm JPYC, the project aims to circulate up to 1 trillion yen ($6.78 billion) worth of stablecoins within three years. The move reflects Japan’s broader ambition to strengthen its role in global crypto markets while maintaining regulatory safeguards.

The twin measures – a friendlier tax code and a regulated stablecoin launch – underscore Japan’s evolving approach to digital assets, signaling that the country is ready to embrace both innovation and oversight in pursuit of global competitiveness.