April 1, 2025
By Anjali Kochhar
Japan’s Financial Services Agency (FSA) is set to introduce a major regulatory shift that will classify cryptocurrencies as financial products under the Financial Instruments and Exchange Act. This move aims to bring digital assets under the same regulatory framework as traditional securities, ensuring stricter oversight, greater investor protection, and enhanced market transparency.
One of the key aspects of this reform is the application of insider trading regulations to crypto assets. This means that individuals with non-public, price-sensitive information about a cryptocurrency project will be prohibited from using it for trading, similar to how insider trading laws apply to stocks. This step is expected to improve ethical trading practices and build investor trust in Japan’s growing cryptocurrency market.
The FSA plans to present this legislative proposal to Japan’s parliament by early 2026. If approved, it will mark a significant change in the country’s approach to cryptocurrency regulation. Japan has been relatively cautious regarding crypto-related financial products. While markets like the U.S. and Hong Kong have approved spot Bitcoin Exchange-Traded Funds (ETFs), Japan has hesitated, citing concerns about market stability and the need for stronger regulatory frameworks.
Potential Impacts of the Reclassification
- Taxation Changes: Currently, cryptocurrency profits are classified as miscellaneous income, subject to a tax rate of up to 55%. If crypto assets are reclassified as financial products, they may be taxed at a lower self-assessment rate of 20%, similar to other financial instruments like stocks and bonds. This change could encourage more investors to participate in the crypto market.
- Increased Institutional Investment: By recognising crypto assets as legitimate financial products, Japan could attract more institutional investors. This could lead to increased liquidity and stability in the market, as large financial institutions tend to bring long-term capital and credibility.
- Market Integrity and Security: Stricter regulations will likely reduce fraudulent activities, price manipulation, and financial misconduct. This could help Japan establish itself as a global leader in well-regulated crypto markets.
Japan’s Approach to Crypto Regulation
Japan has long been at the forefront of cryptocurrency regulation. It was one of the first countries to recognise Bitcoin as legal tender and implement licensing requirements for crypto exchanges. The latest move further solidifies its commitment to balancing financial innovation with strong consumer protection measures.
As the FSA moves forward with this proposal, stakeholders in the crypto industry and the broader financial sector will closely watch its impact on Japan’s digital asset market.
About the author
Anjali Kochhar covers cryptocurrency and blockchain stories in India as well as globally. Having been in the field of media and journalism for over four years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.
