Japan is set to bring cryptocurrencies under the same regulatory framework as stocks after the country’s lower house of parliament approved a bill that would classify digital assets as financial instruments.
The legislation, which is expected to clear the upper house and take effect next year, would introduce stricter trading rules, lower tax rates and pave the way for new investment products such as crypto exchange-traded funds (ETFs).
The move comes as interest in digital assets grows among both institutional and retail investors in Japan. Regulators hope clearer rules will strengthen the country’s position as a hub for crypto innovation and investment.
Under the proposed changes to Japan’s Financial Instruments and Exchange Act, profits from cryptocurrencies such as Bitcoin and Ether would eventually be taxed at a flat 20% rate, matching stocks and bonds. Crypto gains are currently taxed at rates of up to 55%. The tax change is expected to take effect in 2028.
The bill would also tighten oversight of the crypto industry. Insider trading involving digital assets would face penalties similar to those for stock market violations, while the maximum punishment for operating an unregistered crypto business would increase from three years to 10 years in prison.
Industry participants welcomed the legislation, saying it provides long-awaited regulatory clarity for the sector.
The new framework could also open the door for crypto ETFs in Japan, giving investors a regulated way to gain exposure to digital assets. Japan Exchange Group, which operates the Tokyo Stock Exchange, expects crypto-linked ETFs could begin trading as early as next year.
Institutional interest in crypto has been rising as Japanese investors look beyond traditional low-yield assets. Major banks have already launched stablecoin initiatives, while the country approved its first yen-backed stablecoin in 2025.
However, the tougher rules may create challenges for smaller crypto exchanges. Industry analysts expect stricter disclosure, compliance and auditing requirements to favor larger firms while increasing pressure on smaller operators.
Japan currently has 27 licensed crypto exchanges, including Binance Japan, Coincheck and BitFlyer. Some industry observers believe the tougher regulatory environment could lead to consolidation across the sector as companies adapt to the new rules.
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