The Financial Services Agency (FSA) of Japan has proposed a comprehensive reclassification of cryptocurrencies, paving the way for the launch of cryptocurrency exchange-traded funds (ETFs) and introducing a unified tax rate of 20% on digital asset income.
The proposal was presented on Tuesday, suggesting that cryptocurrencies be recognized as "financial products" under the Financial Instruments and Exchange Act (FIEA), aligning with the regulatory framework governing securities and traditional financial products.
The proposed reclassification could also change Japan's current progressive tax system, which imposes rates of up to 55% on cryptocurrency gains, to a unified 20% rate, consistent with the tax treatment of stocks. This change could make cryptocurrency investments more attractive to both retail and institutional investors.
The proposed shift is part of the Japanese government's broader "new capitalism" strategy, aimed at positioning the country as an investment-driven economy.
This move comes as interest in cryptocurrencies as legitimate investment assets continues to grow. According to FSA data, as of January 2025, there are over 12 million active domestic cryptocurrency accounts, with assets held on platforms exceeding 5 trillion yen (approximately $34 billion).
In the proposal, the FSA also revealed that cryptocurrency holdings have now surpassed participation in some traditional financial products, such as foreign exchange and corporate bonds, particularly among tech-savvy retail investors.
The proposal also responds to the surge in global institutional participation. The FSA cited data showing that over 1,200 financial institutions, including U.S. pension funds and Goldman Sachs, now hold U.S.-listed spot Bitcoin ETFs.
Japanese regulators aim to support similar developments domestically, especially as global inflows into cryptocurrencies continue to expand.
In April, Sumitomo Mitsui Financial Group (SMBC), TIS Inc., Ava Labs, and Fireblocks signed a memorandum of understanding to explore the commercialization of stablecoins in Japan. The collaboration will focus on issuing stablecoins pegged to the U.S. dollar and Japanese yen.
The group also plans to study the application of stablecoins in the tokenization of real-world assets (such as stocks, bonds, and real estate) for settlement.
In March, Japan granted the first license allowing a company to handle stablecoins to SBI VC Trade, a subsidiary of local financial group SBI, which stated it is preparing to support Circle's USDC.
Related: High Risk, High Reward: Crypto Perpetual Futures Gain Momentum in the U.S.
Original: “Japan Proposes Reclassifying Cryptocurrencies, Paving the Way for ETFs and Lower Taxes”
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