The Japanese Parliament has approved a legal amendment that classifies cryptocurrencies as financial products. The change marks a fundamental shift in the country’s Financial Instruments and Exchange Act.
The bill passes both chambers
The amendments were approved during a plenary session of the House of Councillors on Wednesday, completing the legislative process in both chambers of the Japanese Parliament. According to NHK, the approval brings the parliamentary stage to a close.
The new framework reclassifies crypto assets as a separate category of financial products, similar to stocks and bonds. This represents a major turning point. Until now, cryptocurrencies have been regulated as a payment method under the Payment Services Act. They will now be treated more like exchange-traded stocks and bonds.
According to CoinPost, the legislation introduces stricter prohibitions against insider trading. Crypto asset issuers will also face mandatory annual disclosure requirements.
Penalties for unregistered operators will become significantly tougher. The maximum prison sentence will increase from three years to ten years, while the maximum fine will rise from 3 million yen to 10 million yen, equivalent to approximately $18,500 and $61,600, respectively.
Tax burden to be reduced
The most notable part of the reform is the introduction of a separate taxation system for cryptocurrency profits. Under the new framework, the effective tax rate will be approximately 20%, while investors will also be allowed to carry losses forward for three years.
This represents a substantial reduction. Cryptocurrency gains in Japan are currently classified as “miscellaneous income,” with tax rates reaching as high as 55%. Investors have complained about this disparity for years, and the heavy tax burden has often been cited as one of the factors pushing crypto businesses and investors out of the country.
However, the tax changes will not take effect immediately. The reform is expected to enter into force in January 2028, with implementation forming part of the 2027 fiscal year. Investors will therefore have to wait roughly another year and a half before benefiting from the new rates.
The path opens for spot ETFs
The legislation also lays the groundwork for the introduction of spot cryptocurrency exchange-traded funds in Japan.
According to CoinPost, Japan Exchange Group, or JPX, plans to list the first crypto ETFs as early as 2027. Traditional financial institutions are expected to act as issuers.
However, local approval for Bitcoin ETFs is not yet guaranteed. Regulators have not made a firm commitment on whether such products will receive final authorization.
The law is expected to be formally promulgated in the near future and is scheduled to take effect within one year of its promulgation. Detailed implementation rules will be clarified through cabinet orders and regulatory guidelines. Much of the practical work surrounding the new framework therefore remains unfinished.
Japan has long followed a cautious yet consistent approach to cryptocurrency regulation. Following the Mt. Gox collapse, the country placed the sector under strict supervision. It is now attempting to integrate the asset class into mainstream finance while maintaining that regulatory discipline.
The combination of lower taxes and a potential spot ETF framework suggests that Tokyo wants to strengthen its position against Hong Kong and Singapore in the regional competition for cryptocurrency investment and financial innovation.
