Japan’s Financial Services Agency (FSA) is considering a sweeping regulatory overhaul that would classify cryptocurrencies as financial products subject to insider-trading rules, while significantly reducing taxes on crypto profits, the Asahi Shimbun reported on Sunday.
The proposal marks one of the most substantial updates to Japan’s digital-asset framework since it became one of the earliest countries to regulate crypto exchanges in 2017.
Stricter Oversight and Investor Protection
According to the report, the new regulations would apply to 105 approved cryptocurrencies available in Japan, including major tokens such as Bitcoin and Ethereum.
Under the proposed rules, crypto exchange operators would be required to provide more detailed disclosures to customers, including warnings about price volatility, the structure of underlying blockchain technologies, and information on whether the asset has an identifiable issuer.
The changes are designed to bring cryptocurrencies in line with other financial instruments by subjecting them to stricter governance and insider-trading restrictions. The move reflects the FSA’s growing concern over the rapid expansion of digital assets and the need to better protect retail investors.
Integration with Traditional Finance
In a notable shift, the proposal would also allow banks and insurance firms to offer cryptocurrency services to depositors and policyholders through their securities subsidiaries. This could broaden access to digital assets and integrate crypto more deeply into Japan’s traditional financial system.
Significant Tax Reductions
Another key component of the proposed reforms is a major tax change. Profits from cryptocurrency transactions would be taxed at a flat 20% rate, equivalent to the rate applied to stock trading.
This is a significant reduction from the current tax structure, where crypto gains are treated as miscellaneous income and taxed at rates that can climb to 55% for high-income individuals.
Timeline and Potential Impact
The FSA aims to introduce the necessary legislation during next year’s ordinary session of Japan’s parliament, the Asahi said, though it did not cite its sources. The agency has not yet publicly commented on the report.
If adopted, the proposed framework would make Japan one of the most crypto-integrated and investor-friendly regulatory environments among major economies.