Financial Services Agency Proposes Reclassification and Tax Cuts
Japan's Financial Services Agency is preparing a comprehensive regulatory overhaul that would reclassify digital assets as financial products under the Financial Instruments and Exchange Act. The proposal includes slashing the cryptocurrency tax rate from 55% to a flat 20% while introducing mandatory disclosure requirements for 105 tokens listed on domestic exchanges.
The FSA plans to bring the new crypto-related law proposal to Japan's main parliamentary meeting in 2026 for approval. If enacted, exchanges operating in the country would face strict disclosure obligations for each listed asset. Required information includes whether the token has an identifiable issuer, details about its underlying blockchain technology, and comprehensive volatility profiles.
Taxation Reform and Insider Trading Prohibitions
Japan currently treats crypto earnings as miscellaneous income, subjecting high-earning traders to rates reaching 55%, among the steepest systems globally. The proposed reform would tax gains on the 105 approved cryptocurrencies similarly to stocks at a flat 20% capital gains rate. This change would align Japan's crypto taxation more closely with traditional financial instruments.
The regulatory framework introduces insider trading prohibitions to the domestic crypto market for the first time. Individuals or entities with access to non-public information, including upcoming listings, delisting plans, or an issuer's financial distress, would be banned from buying or selling affected tokens. These rules mirror protections already applied to traditional securities markets.
Disclosure Requirements and Bank Involvement
Both Bitcoin and Ethereum would fall under the new classification system alongside 103 other digital assets listed on Japanese exchanges. The mandatory disclosure requirements aim to provide investors with standardized information for making informed decisions. Exchanges will bear responsibility for compiling and maintaining this data for regulatory compliance.
The FSA is simultaneously considering whether to allow banks to acquire and hold cryptocurrencies like Bitcoin for investment purposes. Under current rules, banks are effectively barred from holding digital assets due to volatility concerns. The regulator plans to revisit these restrictions at an upcoming Financial Services Council meeting.
Japanese authorities are also exploring whether bank groups should be permitted to register as licensed cryptocurrency exchanges. This would enable traditional financial institutions to offer trading and custody services directly to customers. The move represents a significant shift in how established banks could participate in the digital asset ecosystem, potentially bringing institutional infrastructure and compliance standards to crypto markets while expanding access for retail customers seeking regulated service providers.