Japan moves to regulate crypto like stocks in market growth push

JAPAN’S parliament is poised to pass legislation bringing cryptocurrencies under the same regulatory framework as stocks, a move that’s set to expand access to digital assets.

The bill, which was passed in the lower house on Thursday (Jun 11), would classify crypto assets as financial instruments, making them subject to lower taxes and stricter trading rules and opening the door to new products like exchange-traded funds. It’s expected to take effect next year after going through the upper house.

The proposed legal changes come amid growing demand for crypto assets among Japanese financial institutions and retail investors, a trend accelerated by Donald Trump’s pro-crypto stance in the US. Regulators hope a clearer legal framework will boost the appeal of Japan’s market.

“We aim to foster more innovation by creating a sound trading environment,” said Masato Yoshizawa, a representative for the Financial Services Agency’s policy and markets bureau. “We’re not necessarily giving crypto a stamp of approval, but we’re aiming for healthy market growth.” 

Japan’s bill brings long-awaited clarity to crypto industry players, who see it as a step toward broader adoption.

The proposed revisions to the Financial Instruments and Exchange Act would see the capital gains tax on holdings of tokens like Bitcoin and Ether fall from the current maximum of 55 per cent to a 20 per cent flat rate, in line with stocks and bonds. This change is expected to come into effect in 2028.

“Would it be better if taxes were zero? Yes, but at least things are clear,” said Koichi Kano, Japan head at Singapore-based crypto market maker QCP Group.

“Until now, crypto was like football — it was interpreted differently by different people. Now, we all know that we’re playing American football, and we all need a helmet.” 

QCP appointed Kano, a former FX head at Citigroup, as its first Japan representative earlier this year in anticipation of the new regulations.

The bill seeks to tighten restrictions on crypto insider trading, with penalties like fines and imprisonment comparable to those applied to listed securities. The new law would also raise the maximum punishment for unregistered crypto sellers to 10 years in prison from the current three years.

“The strong enforcement will create a high-trust ecosystem,” said Hinza Asif, president of the Asia Web3 Alliance, which advises foreign crypto firms looking to enter Japan. “The punishments are clear.”

Institutional interest in crypto has been rising in Japan as the nation emerges from decades of stagflation and ultra-low interest rates, prompting investors to seek higher-yielding assets. Three of the country’s megabanks launched a project to jointly issue stablecoins in November, with backing from the FSA. 

Japan approved the issuance of the first yen-backed stablecoin, JPYC, in autumn 2025 and more than 3.8 billion yen (S$31 million) of the token has been issued so far, according to data compiled by consulting firm Kirifuda.

The new law will not apply to stablecoins, which will continue to be regulated as payment services. For tokens like Bitcoin, however, it will open up the possibility of ETFs, offering local investors more exposure to crypto markets.

Tokyo Stock Exchange operator Japan Exchange Group sees crypto-tracking ETFs listing as soon as next year. 

Until now, Japanese stock investors have mainly sought crypto exposure via listed firms with large token holdings such as Metaplanet Inc, which owns more than 40,000 Bitcoin. The new legislation may be a headwind for these so-called digital-asset treasuries as they will be forced to compete with ETF providers, said QCP’s Kano.

The regulations are also likely to trigger a shakeout in Japan’s crowded crypto exchange industry, according to Shohei Matsumoto, executive officer at Tokyo-based crypto consultancy Pacific Meta. While large institutions will have the capacity to handle stricter disclosure and auditing requirements, the rules will be a heavy burden for smaller firms, he said. 

Japan is home to 27 registered crypto exchange providers, including Binance Japan, Coincheck and BitFlyer, according to government data as of April 1.

“It wouldn’t be surprising if around half of Japanese exchanges disappeared, given how much stricter things are likely to become,” said Matsumoto. BLOOMBERG

Source: https://www.businesstimes.com.sg/international/japan-moves-regulate-crypto-stocks-market-growth-push