Japan's parliament has approved historic amendments to the Financial Instruments and Exchange Act. This decision fundamentally changes the legal status of digital assets in the country, reclassifying them from a category of payment methods into a full-fledged class of investment instruments. The main provisions will take effect within a year of official publication, with precise regulatory mechanisms to be outlined in cabinet orders and supervisory guidelines.
Previously, cryptocurrencies were primarily viewed as a means of exchange. Now, the law designates them as a separate category of financial instruments, clearly distinguishing them from traditional securities. Stablecoins, however, remain under the purview of legislation governing electronic payment instruments.
Trading and Fighting Insider Dealing
One of the key innovations is the introduction of a direct ban on trading using material non-public information. This ban applies to all assets admitted for trading on crypto exchanges registered in Japan. The law considers insiders not only employees of issuers but also workers at trading platforms, as well as any market participants with access to data on listings, delistings, project changes, or large transactions.
Companies issuing cryptocurrencies are now required to disclose information before listing, publish data on material events, and report annually. For assets without a clear issuer, such as Bitcoin, the disclosure obligation falls on registered trading platforms. Concurrently, penalties for illegal activities are being tightened: the maximum prison sentence for operating without registration increases from three to ten years, and the upper limit for fines rises from 3 million to 10 million yen.
Taxes: Separate Accounting and a 20.315% Rate
Although tax changes are not directly part of the adopted amendments, they are part of a separate reform. The proposed model involves separate taxation of profits from crypto assets at a fixed rate of 20.315%, with the possibility of carrying forward losses for the next three years. This regime will apply only to assets traded through operators registered in Japan. The final list of coins and the procedure for accounting for transactions will be approved separately.
It is important to note that income from staking, lending, and NFT transactions is expected to continue to be taxed under a progressive scale as miscellaneous income. The tax changes are planned to be introduced on January 1, 2028.
The Path to Crypto ETFs
The transfer of crypto assets under the umbrella of the Financial Instruments and Exchange Act creates a legal foundation for the emergence of spot exchange-traded funds (ETFs). According to my information, the Japan Exchange Group is already considering the possibility of listing the first crypto ETFs in 2027, with potential issuers possibly being traditional financial giants. However, the adoption of the amendments is not automatic approval—launching the funds will require a separate package of regulations and regulatory decisions.
This step by Japan is not just a local reform but a powerful signal for the entire global market. A country that has long been considered one of the most progressive crypto regulators is making another strategic move, integrating digital assets into its traditional financial ecosystem. In my view, this will not only increase institutional confidence but also create a precedent that other major Asian economies may adopt.