Japan Proposes Reclassifying Crypto as Financial Products

Japan is on the verge of a major regulatory shift. The government is preparing to reclassify crypto assets as financial products under the Financial Instruments and Exchange Act.

This move would effectively make cryptocurrencies subject to insider trading laws, bringing them under the same legal umbrella as traditional securities.

The Financial Services Agency (FSA) is set to submit a bill to parliament as early as 2026 to amend the legislation. If passed, this change would introduce stricter regulations, prohibiting the use of non-public information for personal gain. Currently, digital assets operate in a parallel regulatory space with limited oversight, allowing trading practices that would be illegal in mainstream financial markets.

Regulators Integrating Crypto Assets

This development is part of a broader global trend where regulators are stepping up efforts to integrate crypto assets into traditional financial oversight frameworks.

The United States has also made similar moves, with the Commodity Futures Trading Commission (CFTC) announcing that digital asset derivatives will receive the same regulatory treatment as other financial instruments.

The Financial Services Agency (FSA) has also been working behind the scenes with legal and financial experts to strengthen controls and provide clearer rules for the rapidly evolving crypto sector.

In the United States, the Federal Deposit Insurance Corporation (FDIC) has issued new guidance allowing banks to engage in crypto-related activities without prior approval, provided they manage the risks appropriately.

Similarly, the Office of the Comptroller of the Currency (OCC) has clarified permissions for national banks dealing with crypto, signaling a broader regulatory green light. These developments indicate a shift towards greater regulatory clarity and oversight in the crypto space.

Japan Considers Crypto ETFs and Lower Taxes

Japan is considering a legal update that could facilitate the launch of crypto exchange-traded funds (ETFs) and reduce taxes on cryptocurrency profits. The proposed changes may enable the launch of crypto ETFs and lower the tax rate on crypto gains from 55% to 20%.

However, the Japanese government remains cautious about adopting more radical measures, such as adding Bitcoin to national reserves, due to concerns over volatility and legal constraints.