Japan is preparing for one of its most significant crypto regulatory shifts in more than a decade, as the Financial Services Agency (FSA) considers reclassifying crypto assets from “payment instruments” to “financial products.” The move comes amid soaring adoption — with crypto accounts quadrupling to 13 million in five years — and growing concerns over fraud, cybercrime, and inadequate consumer protections.
During the FSA’s sixth crypto working group meeting on November 26, officials highlighted an average of 350 monthly consumer complaints, rising overseas scam activity, and increasingly sophisticated attacks targeting Japanese users.
Why Japan Wants to Shift Crypto Under Securities Law
If approved, oversight would move from the Payment Services Act (PSA) to the stricter Financial Instruments and Exchange Act (FIEA). This would introduce more rigorous disclosure rules, insider-trading safeguards, criminal penalties, and enhanced reporting obligations for exchanges.
Several industry voices argue the change is overdue. Emeritus Professor Yoshikazu Yamaoki noted that tokens like Bitcoin and Ethereum no longer behave like payment tools but instead mirror speculative investment assets — similar to securities.
Others warn the shift could burden small exchanges and accelerate consolidation, as FIEA-level compliance requirements are significantly heavier.
Tax Reform: The Turning Point
The working group also supports a flat 20% tax on crypto gains, matching stock trading. Currently, crypto income is taxed as miscellaneous earnings — ranging from 15% to 55%.
Industry advocates say aligning taxes with equities could help Japan catch up with global crypto adoption. ANAP Holdings CEO Rintaro Kawai argues the country is already “significantly behind” and risks having “no future” in Bitcoin innovation without meaningful reform.
A Fragmented Framework That Can’t Keep Up
Japan pioneered early crypto regulation, but years of piecemeal amendments — from Mt. Gox reforms to 2022’s stablecoin laws — have resulted in an inconsistent legal structure. Whitepapers require no formal accuracy standards, and self-regulation by the JVCEA remains weaker than traditional securities oversight frameworks.
Regulators now believe only a full transition to securities-style supervision can restore market integrity.