Japan’s FSA Plans to Classify Crypto as Financial Products, Eyes 20% Tax Rate

• Japan’s Financial Services Agency (FSA) plans to classify cryptocurrencies as financial products.
• Mandatory disclosures would be required for 105 domestic-listed tokens, including Bitcoin and Ethereum.
• Insider trading regulations would apply to crypto for the first time.
• Proposed tax rate would drop from up to 55% to a flat 20% on crypto gains.
• Banks may be allowed to hold cryptocurrencies and offer trading services.
• The proposal is expected to be presented to Japan’s parliament in 2026.

Japan’s Financial Services Agency (FSA) is preparing a major overhaul of the country’s crypto regulations. The agency plans to reclassify cryptocurrencies as financial products under the Financial Instruments and Exchange Act, a move that would bring digital assets like Bitcoin (BTC) and Ethereum (ETH) under stricter oversight.

According to a report from Asahi Shinbun, the new framework would require exchanges to provide mandatory disclosures for the 105 cryptocurrencies listed domestically. These disclosures would include:

• Whether the asset has an identifiable issuer
• Details about the underlying blockchain technology
• The volatility profile of the token

The proposal would also bring crypto under insider trading regulations. Individuals or entities with access to non-public information—such as upcoming listings, delistings, or financial issues of issuers—would be prohibited from trading affected tokens.

The FSA plans to submit the new law proposal to Japan’s main parliamentary meeting in 2026 for approval.

Crypto Tax Overhaul

Japan currently taxes crypto earnings as miscellaneous income, which can reach up to 55% for high earners, making it one of the highest tax rates for crypto worldwide. The FSA now wants to treat gains on the approved 105 tokens like stocks, applying a flat 20% capital gains tax.

The change aims to simplify taxation, make crypto investment more appealing, and encourage compliance among domestic traders.

Banks Could Hold Crypto

In addition to classification and tax reforms, the FSA is exploring the possibility of allowing banks to acquire and hold cryptocurrencies such as Bitcoin for investment purposes. Current rules effectively prohibit banks from holding crypto due to its volatility.

The regulator is also considering whether bank groups could register as licensed crypto exchanges, allowing them to provide trading and custody services directly to clients. This could expand institutional involvement in Japan’s digital asset market.

The proposed changes demonstrate Japan’s commitment to creating a regulated, transparent, and more investor-friendly crypto ecosystem while addressing risks like volatility and insider trading.

Final Thought

Japan’s FSA is taking significant steps to modernize crypto regulations. By classifying digital assets as financial products, introducing insider trading rules, and lowering the tax rate to 20%, the country aims to make crypto more transparent and accessible. If approved in 2026, these reforms could position Japan as a global leader in regulated cryptocurrency markets.