Japan’s Financial Services Agency (FSA) is advancing key regulatory changes to bring digital assets under a more structured financial framework, signaling a major development in the country’s approach to crypto oversight. The FSA has called for a legislative review to reclassify digital assets as “financial products” under the Financial Instruments and Exchange Act, a shift that would align them with traditional securities like stocks. This reclassification, if adopted, could help standardize how digital assets are taxed and traded, potentially opening the door to the launch of domestic exchange-traded funds (ETFs) and encouraging institutional investment [1].
Currently, digital assets in Japan are legally defined as “payment methods,” a categorization that imposes higher tax burdens on investment gains and complicates their use as speculative or long-term assets. The FSA has suggested replacing this with a flat 20% capital gains tax, a measure that could reduce investor uncertainty and promote broader market participation. The change would also bring digital asset taxation in line with that of traditional financial instruments, reducing the current tax rate of up to 55% on gains under the “miscellaneous income” classification [1].
The regulatory evolution reflects a broader shift in Japan’s approach to digital assets. While the country has long maintained a cautious stance, it has avoided outright bans and instead opted for structured oversight. High-profile incidents, such as the collapse of the Mt. Gox exchange in 2014, have led to stricter regulations, including mandatory reporting and inspection requirements for exchanges. More recently, the government has shown increased openness, with Finance Minister Katsunobu Kato speaking at a blockchain event in Tokyo and acknowledging the role of digital assets in a diversified investment portfolio. He emphasized the need for a balanced regulatory approach to preserve innovation while managing risks [1].
These developments are also politically significant. Japan’s ruling Liberal Democratic Party (LDP), now a minority government, is seeking to expand its appeal among younger voters. Digital assets have gained popularity among younger demographics, and the LDP’s continued support for innovation in this space could help strengthen its political relevance. Additionally, the government is keen to maintain Japan’s status as a global financial hub and has historically supported technological advancements to reinforce this position [1].
A related development involves the emergence of stablecoins, which could provide a bridge between traditional and digital finance. JPYC, a private company, has been granted approval to issue up to ¥1 trillion (~$6.8 billion) in its stablecoin over the next three years. This move follows examples such as Tether and Circle, which have become significant buyers of U.S. government debt. By positioning stablecoins as potential purchasers of Japanese government securities, authorities and private players see an opportunity to stimulate investment and provide a digital alternative to central bank digital currencies (CBDCs) [1].
Source: [1] Japan plans tax changes to boost digital asset investment (https://coingeek.com/japan-plans-tax-changes-to-boost-digital-asset-investment/)
AloJapan.com