Japan's long-criticized tax system for cryptocurrencies is facing a radical change.
The Financial Services Agency (FSA), the country's top financial regulator, is preparing to reclassify 105 crypto assets, including Bitcoin and Ethereum, into the “financial product” category. According to the Asahi Shimbun, the cryptocurrencies in question will be regulated under the Financial Products Transactions Act.
The FSA's move reportedly includes requesting tax relief from the government ahead of the next fiscal year. According to Asahi, these new regulations will be similar to the tax model applied to stock trading and could significantly put an end to Japan's controversial crypto taxation system.
Under Japan's current system, cryptocurrency earnings are declared as “miscellaneous income,” and investors in the highest tax bracket are required to pay 55% of their earnings to the government. Given that cryptocurrency earnings are considered capital gains and taxed at lower rates in many countries, Japan's system has long been the subject of criticism.
If the FSA's proposal is implemented, profits from these 105 cryptocurrencies would be taxed at a single, flat tax rate of 20%. The agency hasn't made an official statement on the matter, but the report stated that criteria such as transparency, the reputation of the issuing institutions, technological robustness, and price volatility risk were taken into consideration in determining the coins to be included on the list.
The FSA is also planning to introduce new rules to prevent insider trading in the domestic crypto industry, according to the report. Under the regulations, individuals and companies affiliated with exchanges or issuers would be prohibited from trading while possessing sensitive data, such as listing dates or financial status information that has not yet been disclosed.
These regulations are intended to be included in the budget discussions to be held in the first weeks of 2026.
Japan's cryptocurrency sector currently has a “green list” system managed by its own self-regulatory body, the Japan Virtual Currency Exchange Association (JVCEA). The list currently includes 30 crypto assets, including high-cap coins like BTC, ETH, MATIC, XRP, and LTC.
For a token to be greenlisted, it must meet three conditions:
- Must be listed on at least three JVCEA member exchanges
- Must be listed on a JVCEA member exchange for at least six months
- It is deemed “eligible” by the JVCEA and is allowed to be listed unconditionally.
*This is not investment advice.
