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Japan’s Financial Services Agency (FSA) has proposed a landmark reclassification of cryptocurrencies as financial products, signaling a major regulatory shift that could transform the nation’s crypto landscape.
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This initiative aims to introduce crypto exchange-traded funds (ETFs) and implement a flat 20% capital gains tax, potentially boosting both retail and institutional investment in digital assets.
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According to COINOTAG, the FSA’s proposal aligns with Japan’s broader “New Capitalism” strategy, emphasizing the country’s ambition to become a global investment hub through progressive crypto regulation.
Japan’s FSA proposes classifying crypto as financial products, enabling ETFs and a flat 20% tax, driving growth in digital asset investments and institutional adoption.
Japan’s Crypto Market Expansion: Over 12 Million Active Accounts and Rising Institutional Interest
The FSA’s proposal arrives amid a significant surge in crypto adoption within Japan, with over 12 million active crypto accounts reported as of January 2025. This figure underscores the growing acceptance of digital assets among Japanese investors, surpassing participation rates in traditional financial instruments such as foreign exchange (FX) and corporate bonds.
Assets held on domestic crypto platforms have soared beyond 5 trillion Japanese yen (approximately $34 billion), reflecting robust market activity. The FSA highlights that this growth is driven largely by tech-savvy retail investors, while institutional interest is also gaining momentum.
Globally, over 1,200 financial institutions—including major players like US pension funds and Goldman Sachs—have embraced US-listed spot Bitcoin ETFs. Japan’s regulators are keen to foster a similar environment domestically, recognizing the potential for ETFs to enhance liquidity and market stability.
Regulatory Alignment with Global Trends and Institutional Adoption
By proposing to regulate cryptocurrencies under the Financial Instruments and Exchange Act (FIEA), the FSA is aligning Japan’s crypto framework with established securities laws. This move is expected to facilitate the introduction of crypto ETFs, providing investors with a regulated, transparent vehicle to gain exposure to digital assets.
Moreover, the shift to a flat 20% capital gains tax on crypto income—down from the current progressive rates reaching up to 55%—could significantly improve the investment climate. This tax reform mirrors the treatment of traditional stocks, potentially attracting a broader spectrum of investors and encouraging long-term market participation.
Collaborations to Advance Stablecoin Adoption and Tokenized Asset Settlements
In parallel with regulatory reforms, major financial institutions in Japan are actively exploring the practical applications of blockchain technology. In April 2025, Sumitomo Mitsui Financial Group (SMBC), TIS Inc, Ava Labs, and Fireblocks signed a Memorandum of Understanding to develop stablecoins pegged to both the US dollar and Japanese yen.
This collaboration aims to pioneer the use of stablecoins for settling tokenized real-world assets, including stocks, bonds, and real estate, potentially revolutionizing traditional asset management and settlement processes.
Earlier in March, Japan granted its first stablecoin-related license to SBI VC Trade, a subsidiary of SBI Group, enabling it to support Circle’s USDC stablecoin. This regulatory endorsement marks a critical step toward integrating stablecoins into Japan’s financial ecosystem.
Implications for Japan’s Financial Innovation and Global Crypto Positioning
These developments reflect Japan’s strategic intent to lead in financial innovation by embracing blockchain technology within a robust regulatory framework. The integration of stablecoins and tokenized assets could enhance market efficiency, reduce settlement times, and lower transaction costs.
Furthermore, by harmonizing tax policies and regulatory standards with global practices, Japan is positioning itself to attract international capital and foster sustainable growth in its crypto markets.
Conclusion
Japan’s FSA proposal to classify cryptocurrencies as financial products, coupled with the introduction of a flat 20% capital gains tax and support for crypto ETFs, marks a pivotal moment in the country’s crypto regulation. Alongside strategic partnerships to advance stablecoin adoption, these measures are set to enhance investor confidence and drive broader participation in digital assets. As Japan continues to refine its regulatory landscape, it stands poised to become a leading hub for crypto innovation and investment in Asia.
