The Japan Financial regulator responsible for overseeing banking, securities and exchange, and insurance, Japan’s Financial Services Agency ( FSA) has introduced a sweeping classification of cryptocurrencies. The regulator confirmed the development in a statement released on Tuesday, adding that the classification of cryptocurrency would clear a path for the launch of crypto exchange-traded funds (ETFs). It will also see to the introduction of a flat 20% tax on digital asset income.
The proposal also recommended the recognition of cryptocurrency as financial product within the scope of Japan Financial Instruments Act. The Financial Instruments and Exchange Act (FIEA) plays a crucial role in the regulation of securities and traditional financial products.
The proposed classification has the capability of altering Japan’s current progressive tax system. This could reduce the crypto tax rates from 55% to a uniform rate of 20%, reflecting the treatment of stocks. It is worth noting that the proposed classification aligns closely with the Japanese government boarder “New Capitalism” strategy, which aims to position the country as a leader in investment-driven economic growth.
Meanwhile, this development comes at the heels of the rising interest in cryptocurrency as a legitimate investment asset. The Japanese regulator revealed that as of January 2025, over 12 million domestic crypto accounts were active, with assets held on platforms exceeding 5 trillion Japanese yen (about $34 billion).
Japan FSA introduces framework to regulate crypto assets
In April, the Japan Financial Services Agency (FSA) introduced a proactive framework aimed at regulating crypto assets in the country. As revealed, the proposal highlighted key areas such as regulatory oversight and transparency. It also focused on implementing measures to prevent insider trading and establishing industry-specific regulations, which include guidelines for the travel rule and staking practices.
Just last month, the Japanese organ of Binance received key certifications from Japan regulator. As revealed, this certification attests to the safety of the cryptocurrency trading platform. The Japan branch of the exchange gained ISO/IEC 27001 and ISO/IEC 27701 licenses after a series of audits.
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