Japan’s Financial Services Agency (FSA) has put forth a sweeping proposal for the reclassification of cryptocurrencies, a move poised to fundamentally reshape the nation’s digital asset landscape. This initiative is designed to pave the way for the launch of crypto exchange-traded funds (ETFs) and introduce a more favorable flat 20% tax on digital asset income. The proposal signifies Japan’s proactive approach to integrating crypto into its mainstream financial system, potentially making it a global leader in accessible crypto investment.
Landmark Reclassification: Crypto as Financial Products
The FSA’s proposal, introduced on Tuesday, suggests formally recognizing cryptocurrencies as “financial products” under the scope of the Financial Instruments and Exchange Act (FIEA). This is the same comprehensive regulatory framework that currently governs traditional securities and established financial products. This reclassification aims to bring digital assets under a clear and familiar legal umbrella, fostering greater investor confidence and regulatory clarity.
Tax Overhaul: Boosting Investment Appeal
A crucial element of the proposed reclassification is a potential shift from Japan’s current progressive tax system on crypto gains, which can reach rates as high as 55%, to a uniform 20% flat tax. This mirrors the tax treatment applied to traditional stocks, making crypto investing significantly more attractive for both individual retail investors and large institutional players. This tax reform could unlock substantial new capital flow into the Japanese crypto market.
Aligned with Japan’s ‘New Capitalism’ Strategy
This proposed regulatory shift is an integral part of the Japanese government’s broader “New Capitalism” strategy. This national economic vision seeks to strategically position Japan as an investment-led economy, driving growth through innovative financial policies. By embracing cryptocurrencies with a clear and attractive framework, Japan aims to secure a leading role in the evolving global digital economy.
Crypto Adoption Surges Across Japan
The timing of this reclassification proposal coincides with a remarkable surge in crypto interest within Japan. According to the FSA, over 12 million domestic crypto accounts were active as of January 2025, collectively holding assets exceeding 5 trillion Japanese yen, approximately $34 billion. This data highlights that crypto ownership in Japan now surpasses participation in some traditional financial products like FX and corporate bonds, particularly among tech-savvy retail investors.
Responding to Global Institutional Engagement
The FSA’s proposal also directly responds to the global surge in institutional engagement with cryptocurrencies. The agency cited compelling data revealing that more than 1,200 financial institutions worldwide, including major US pension funds and Goldman Sachs, are now holding US-listed spot Bitcoin ETFs. Japanese regulators are keen to support similar domestic developments, especially as global fund flows into crypto continue to expand, positioning Japan to capture this growing institutional appetite.
Advancing Stablecoin Commercialization
Japan is also actively exploring the commercialization of stablecoins. In April, Sumitomo Mitsui Financial Group (SMBC), TIS Inc., Ava Labs, and Fireblocks signed a Memorandum of Understanding to explore issuing stablecoins pegged to both the US dollar and the Japanese yen. Furthermore, the group plans to examine the use of stablecoins for settling tokenized real-world assets such as stocks, bonds, and real estate, demonstrating a comprehensive vision for digital currency utility. In March, Japan also issued its first license for a company to deal with stablecoins to SBI VC Trade, a subsidiary of SBI, preparing to support Circle’s USDC.
