Japan is on the way to determining regulatory clarity. After a hiatus, on June 24, 2025, Japan’s Financial Services Agency (FSA) released an important proposal that would overhaul Japanese crypto laws. The proposal intended to recognize digital assets as financial products under the Financial Instruments and Exchange Act (FIEA) category, with tax considerations changing from as high as 55% on crypto gains to a flat 20%. We expect to see Tokyo introduce its bitcoin ETFs, and markets should open for retail and institutional investors. This comprehensive report outlines the main subtopics and illustrates how this change could change the economic structure in Japan.
Why This Proposal is Important
At the present time, Japan has regulated crypto under the Payment Services Act, identifying crypto as a means of payment, as opposed to an investment product. The FSA proposed a new cryptocurrency classification under the FIEA, which would offer stronger investor protections and also create an environment for Bitcoin ETFs on domestic exchanges. Digital assets are nearing mainstream investor products, now having over 12 million crypto accounts and more than ¥5 trillion (approx. $34 billion) on Japanese domestic platforms.
ETF Access: A New Era of Trading
Reclassifying crypto as financial instruments removes the legal barriers preventing Bitcoin ETFs in Japan. The FSA plans to hold a deliberation on June 25 at the Financial System Council—one of the most significant discussions yet on domestic crypto reform. If approved, this could allow major asset managers to launch regulated Bitcoin ETFs, mirroring global trends and catalyzing new capital inflows.
Tax Reform: Flat 20% for Crypto Gains
Crypto investors in Japan are currently taxed as “miscellaneous income,” which can be due to an upper limit of 55%. The proposed flat 20% rate aligns cryptocurrency with capital gains taxation on stocks and would be an important incentive for investors. Tax reduction would likely increase the amounts of domestic investment as well as helping to retain the ongoing capital flight to offshore markets that capital has gone to given the heavy tax burdens from the Japanese tax department.
Institutional Retreat and the Metaplanet Example
Regulatory headwinds have already pushed some firms abroad. Tokyo-listed Metaplanet, the former hotel and now Bitcoin treasury pioneer, last week announced a $5 billion infusion into its US subsidiary—ostensibly, to accelerate its Bitcoin accumulation in a more favorable legal and tax environment. Metaplanet’s objective is 210,000 BTC by 2027, but the pivot serves as nuanced case study of how inertia at home may be leading to the export of corporate capital.
Alignment with “New Capitalism” and Global Trends
This proposition supports Japan’s larger “New Capitalism” initiative and a revamped 2025 economic plan promoting Web3, NFTs, and asset hubs. It also highlights global regulatory changes—such as U.S. spot Bitcoin ETF approvals with state-provided crypto support, as in Texas—that reinforce an allied environment.
Investor Protection and Market Safeguards
Regulating crypto as a financial product further augments regulatory supervision; establishing compliance with insider-trading provisions, interconnecting transparency, and enhanced supervision. The FSA has stated these protections will govern both retail and institutional involvement.
What Comes Next
- June 25: The FSA initiates formal discussion of the draft at the Financial System Council.
- Mid-2025 to early 2026: Potential launch of study groups and bill proposals targeting amendments to FIEA.
- 2026 and beyond: If approved, expect rule changes enabling Bitcoin ETFs, flat-20% crypto gains taxes, and upgraded oversight protocols.
Conclusion
Japan’s proposed crypto reforms represent a radical turn away from Japan’s past restrained position and efforts to regulate around cryptocurrencies. By allowing cryptocurrency to receive the same legal status and taxing equivalently to stocks, Japan could potentially spark an uptick in domestic investment, strengthen their alternative-finance leadership position and regather capital it once lost. While Japan considers making a positive move forward, the existing global crypto community is paying special attention – this may ultimately be a watershed moment for the continued adoption and acceptance or rejection of digital assets.
