Japan is preparing to make a massive revision of its crypto policy

Japan’s Financial Services Agency (FSA) is preparing to make drastic changes to its digital asset framework. Changes that combine tax reform and regulatory upgrades could introduce cryptocurrency-related exchange operations funds (ETFs).

The initiative illustrates Japan’s purpose in integrating crypto into mainstream finance and attracting wider investments.

Tax burden during review

The reform package reported in the country contains two important parts. First, it consists of revising the tax law that moves crypto from comprehensive taxation to the same category as stocks. Second, it includes legal amendments to reclassify Crypto as a financial instrument, allowing the FSA to apply insider trading rules, disclosure standards and investor protection under the Financial Instruments and Exchange Act.

Currently, Japan benefits from cryptocurrencies as “other revenue” and charges progressive fees that can exceed 50% if local taxes are included. Alternatively, stocks and bonds will be subject to a fixed tax of 20%.

According to Nikkei, the FSA proposes moving ciphers to 20% of the system for fiscal year 2026. Investors will also be able to move forward for three years. Authorities believe that equity with stocks will reduce the burden on investors and increase market activity.

Regulatory shifts to enable ETFs

The second pillar of the FSA involves amending the Securities Act to classify crypto as a financial instrument. This clears crypto ETF passes, including spot bitcoin funds that are not available in Japan. Observers argue that ETFs can offer investors access and regulated options while increasing market transparency.

According to Beincrypto, the agency is also planning internal restructuring, creating a bureau dedicated to digital finance and insurance. This reflects how crypto is intertwined with the broader financial system and requires consistent surveillance.

Japan’s history, including code, shows both risk and resilience. In 2014, Tokyo-based Mt. Gox handled more than 70% of the world’s Bitcoin transactions before it collapsed. Regulators have incorporated lessons into today’s more stringent frameworks since the crisis.

Number of custody wallets in Japan. Source: JVCEA

Momentum has since shifted to measured but steady growth. Shiraishi, Vice Chairman of the Japan Crypto Business Association, has recorded global market expansion from $872 billion to $2.66 trillion. In contrast, Japan’s domestic trading volume is projected to reach $1330 billion, up from $66.6 billion in 2022. This emphasizes that retail participation remains restrained while corporate adoption accelerates.

88% of the people did not own Bitcoin

A survey cited by DocumentingBtc by Cornell Bitcoin Club found that 88% of Japanese residents do not own Bitcoin. Analysts suggest that tax burdens and regulatory uncertainty are preventing the recruitment of a wider range of households. FSA reforms aim to address these barriers by simplifying tax handling and providing reliable ETF structures.

However, institutional interest is growing. A joint survey by Nomura Holdings and Laser Digital revealed that 54% of Japanese institutional investors plan to invest in crypto assets within three years, while 62% cite diversification benefits. The FSA has also published the findings, focusing on the priority allocation of 2-5% of managed assets. The results highlight the preparation among key financial players to accept ETFs after regulatory conditions are permitted.

The reforms are consistent with Japan’s “new capitalism” agenda, highlighting investment-driven growth. By clarifying the legal framework and reducing tax burdens, authorities want to encourage households to treat digital assets as part of their long-term portfolio, rather than purely speculative bets.

Post Japan has prepared a massive revision to the crypto policy that first appeared in Beincrypto.