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BTC 
ETH Japan's Senate passes bill: Reclassify cryptocurrencies as financial products and unify the tax rate at 20%
Japan's Senate has passed a landmark bill to reclassify cryptocurrencies from previous payment methods to financial products. The bill also reduces the tax rate on trading earnings from a maximum of 55% to a uniform 20%, and lays the legal foundation for the launch of domestic cryptocurrency exchange-traded funds (ETFs). Some Japanese retail traders, exchanges and asset management companies have begun preparations to launch ETF products.
What adjustments has Japan made in terms of cryptocurrency taxation and investor rights?
Japan's Senate has passed a landmark bill to reclassify cryptocurrencies, previously considered a payment method, as financial products. The bill also adjusts the tax rate on trading gains from a maximum of 55% to a uniform 20%, and lays the legal foundation for the launch of domestic cryptocurrency ETFs.
The bill amends two existing laws, the Payment Services Act and the Financial Instruments and Transactions Act. Under the new system, exchange operators previously known as "crypto asset trading businesses" will receive new names. Companies that sell crypto assets without registration will have their maximum prison sentence increased from three years to 10 years, and the maximum fine will also be increased from 3 million yen (approximately US$18,500) to 10 million yen (approximately US$61,600).
Profits from cryptocurrencies will be taxed in the same way as stock profits. Investors can now also carry forward losses into the next three years.
The new tax rate applies to all licensed tokens listed on domestic exchanges, with approximately 105 tokens, including Bitcoin (BTC) and Ethereum (ETH).
This tax adjustment depends on the effective timing of the reclassification measure, which is scheduled to be implemented in fiscal year 2027, and the new 20% tax rate will apply from January 1, 2028.
This bill introduces insider trading rules into the cryptocurrency space for the first time. Investors are not allowed to trade based on confidential information, such as the company's new business plan, or when a token is listed or removed. The Securities and Exchange Commission has been given new investigative powers and has also established a new administrative penalty system. Issuers of certain crypto assets must release information annually.
What changes will ETFs and small exchanges usher in?
This bill establishes a legal framework that allows the establishment and listing of cryptocurrency ETFs. According to reports, Japan Exchange Group is considering listing around 2027. Trust banks and securities companies are expected to attract funds from large investors.
Companies such as Nomura Holdings and SBI Holdings are preparing cryptocurrency products. SBI Securities and Lotte Securities are ready to launch ETF products as soon as the rules allow it.
However, an executive at Tokyo-based consulting firm Pacific Meta estimates that about half of Japan's 27 registered exchanges may be forced to close due to the high cost of complying with the new compliance rules. At the same time, it also opened up markets for banks, insurance companies and large asset managers.
Tax exemptions do not cover all aspects. Pledged rewards, loans and DeFi income, NFTs, and transactions conducted on foreign or unregistered exchanges will still be taxed as miscellaneous income, with a rate of up to 55%. This creates a two-tiered system in which stablecoins are still subject to payment service rules rather than securities rules.
The Chancellor of Finance has designated 2026 as the year of financial reform. Detailed rules have yet to be developed, but reserve requirements, derivative leverage limits, custody rules and anti-money laundering standards will be determined through cabinet orders and regulatory guidelines within the next year, after which the law will formally take effect.
