Japan's FSA Plans to Redefine Crypto Regulations and Taxation

Japan’s Financial Services Agency (FSA) is set to revamp its regulatory framework for cryptocurrencies, aiming to classify digital assets as "financial products" under the Financial Instruments and Exchange Act. This transformation, if approved, would impose mandatory disclosures for 105 cryptocurrencies currently traded on local exchanges, including well-known assets like Bitcoin and Ether.

Key Takeaways

Japan's FSA plans to classify 105 cryptocurrencies as financial products under a new regulatory framework.
Proposed changes will require exchanges to disclose detailed information about listed cryptocurrencies.
The FSA intends to lower the capital gains tax on crypto earnings to 20%, aligning it with stock taxation.
A new bill will address insider trading regulations in the crypto market.
The FSA is also exploring the possibility of allowing banks to hold cryptocurrencies, including Bitcoin.

Japan’s FSA plans to classify crypto as financial products, eyes 20% tax rate: Report

New Regulations for Cryptocurrencies

According to a recent report by Asahi Shinbun, the FSA's proposal aims to bring greater transparency to the cryptocurrency market. Should this law take effect, exchanges would need to provide comprehensive details for each of the 105 listed tokens. This information would include data on the asset's identifiable issuer, the blockchain technology it uses, and its volatility profile.

The FSA plans to present this new proposal for approval at the main parliamentary meeting in Japan in 2026.

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Proposed 20% Flat Tax Rate on Crypto Gains

In addition to regulatory changes, the FSA is advocating for a tax reform. Currently, Japan treats crypto earnings as "miscellaneous income," allowing tax rates to soar up to 55% for high-earning traders, which is among the highest in the world. The FSA is pushing for these 105 approved cryptocurrencies to be taxed at a flat 20% capital gains rate, similar to the taxation of stocks.

Another significant aspect of the initiative includes addressing insider trading in Japan's crypto market. The new bill would restrict individuals and entities with access to non-public information—like upcoming listings or financial issues of issuers—from buying or selling affected tokens.

_Related: Tokyo exchange operator eyes crackdown on Bitcoin-holding firms after DAT rout**

Banks Allowed to Hold Bitcoin?

Additionally, the FSA is contemplating allowing banks to hold cryptocurrencies such as Bitcoin for investment purposes. Presently, banks are largely prohibited from holding digital assets due to concerns about market volatility. However, the FSA is set to reevaluate these restrictions during an upcoming Financial Services Council meeting.

The agency is also considering permitting bank groups to register as licensed cryptocurrency exchanges. This would enable them to offer trading and custody services directly to their customers.

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