- Classification shift. Japan’s House of Councillors approved amendments to the Financial Instruments and Exchange Act (FIEA) on July 15, moving digital assets out of payment-focused rules and into the same regulatory category as stocks and bonds.
- Tax cut signalled. The reclassification triggers a path toward a flat 20% capital gains tax on crypto — down from a maximum marginal rate of 55% — effective from January 2028, matching how equity gains are taxed.
- ETF pathway opened. The Financial Services Agency has been directed to develop a regulatory framework for spot Bitcoin ETFs, a product that has so far been blocked by the existing classification of crypto as a payment instrument rather than an investable asset.
Japan’s parliament on July 15 passed legislation that fundamentally resets how the country treats digital assets, according to CoinDesk. The amended Financial Instruments and Exchange Act brings Bitcoin and more than 105 other cryptocurrencies — previously governed under the Payment Services Act as payment tools — into the same legal framework that covers equities, bonds, and other investment instruments.
What the law changes
Under the new framework, crypto issuers will face mandatory annual disclosure requirements, and exchanges operating without registration face a maximum prison sentence of ten years — up from three — and fines raised from ¥3 million (~$18,500) to ¥10 million. Insider trading bans, which previously had no equivalent in crypto markets, now apply. Full enforcement is expected to begin in fiscal year 2027.
The tax reform is the aspect most immediately visible to retail investors. Japan currently taxes crypto gains at the same progressive rates as miscellaneous income, reaching as high as 55% for high earners. The new flat rate of 20% — 15% national, 5% regional — will not take effect until January 2028, but the legislative commitment removes a long-standing deterrent to participation by Japanese institutional and retail investors alike.
ETFs and institutional access
The reclassification also removes the legal barrier that has prevented the creation of spot Bitcoin exchange-traded funds in Japan. The Financial Services Agency has been tasked with building the regulatory framework for such products. No products have been approved yet, and the FSA has not set a timeline, but the direction is now formally established. This follows a similar structural shift in the United States, where Circle’s federal bank charter — which embedded USDC directly into the US banking system — has accelerated crypto’s move toward regulated financial infrastructure globally.
Market reaction
Bitcoin rose toward $65,000 in the days surrounding the vote, with analysts attributing part of the move to expectations of reduced near-term rate hike risk following soft US inflation data and the Japanese regulatory clarity. The law’s full enforcement in 2027 means the immediate practical change is limited, but the legislative signal is considered the most significant structural shift in Japan’s crypto policy since it first introduced exchange licensing requirements in 2017.